US December PCE Rises 2.6% Year-on-Year, Marking Three Consecutive Months of Increase

In December of last year, the rise in the United States' Personal Consumption Expenditures (PCE) price index was announced to be in line with market expectations. As pointed out by the Federal Reserve, inflation continues to rise. This has strengthened the outlook that it will be more challenging for the Federal Reserve to lower interest rates.

On the 31st (local time), the U.S. Department of Commerce announced that December's PCE rose by 2.6% year-on-year and 0.3% month-on-month. This is in line with market forecasts (2.6% year-on-year increase, 0.3% month-on-month increase). The Core PCE, which excludes the volatile energy and food prices, rose by 2.8% compared to last year, showing the same figure as November.

With signals that inflationary pressure remains in the United States, the possibility of a rate cut this year has become even more uncertain. The PCE growth rate (year-on-year) fell to 2.1% in September last year, then rose to 2.3% in October, 2.4% in November, and 2.6% in December, marking three consecutive months of increase.

US PCE Trend (Image: Investing.com Capture)

According to the CME's FedWatch Tool on this day, the probability that the Federal Reserve will hold rates steady in March is calculated at 82%. The opinion forecasting a 0.25% point rate cut in June slightly increased from 46.3% to 47.4% before the PCE announcement, but the forecast for a rate hold is also not low at 30%.

At the Federal Open Market Committee (FOMC) meeting, which ended on the 29th of last month, the Federal Reserve decided to maintain the benchmark interest rate at 4.25~4.5% per annum. In the statement, they removed the phrase suggesting progress towards the 2% inflation target, instead stating that "inflation remains somewhat elevated." The market interpreted this as a hawkish signal.

Federal Reserve Chairman Jerome Powell stated at a press conference, "Current monetary policy is much less restrictive than before," and "there is no need to rush a change in monetary policy stance." He also expressed confidence, saying, "The economy is still strong."

Reporter Han Gyeongje