The United States recently released inflation data based on Personal Consumption Expenditures (PCE), which significantly impacted market movements on Friday (December 20, 2024).
The PCE inflation rate was reported to have increased by 2.4% year-on-year (YoY) in November, falling short of the Trading Central forecast of 2.5% YoY, yet surpassing the previous month’s 2.3% YoY.
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Meanwhile, the core PCE inflation was reported at a growth of 2.8% YoY, which is lower than the anticipated 2.9% YoY and remains consistent with the growth rate from October of 2.8% YoY.
The PCE inflation figures act as a benchmark for the Federal Reserve when determining monetary policy, making this release particularly influential in financial markets.
Following the PCE announcement, gold prices surged to around $2,609 per troy ounce, marking the daily high. Concurrently, the U.S. dollar faced pressure; EURUSD climbed to approximately 1.04191, while GBPUSD rose to 1.25542. USDJPY dipped to 156.338, and the Nasdaq index, which had plummeted near 21,000, managed to recover.
The stagnation in core PCE growth raises hopes for a potential decrease in the future, thereby creating opportunities for the Federal Reserve to adopt a more aggressive stance on interest rate cuts next year.
As noted during the monetary policy announcement early Thursday, the Fed projected a reduction of interest rates only twice in the upcoming year. However, if the core PCE growth continues to slow, there will certainly be room for the Fed to consider more aggressive rate cuts.
