The United States (US) released its inflation data based on the Personal Consumption Expenditures (PCE) which significantly influenced market movements on Friday (December 20, 2024).
The PCE inflation rate was reported to have risen by 2.4% year-on-year (YoY) in November, falling short of the Trading Central forecast of 2.5% YoY, yet still surpassing the previous month’s figure of 2.3% YoY.
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Meanwhile, the core PCE inflation rose to 2.8% YoY, which was below the anticipated forecast of 2.9% YoY, although it matched the growth rate from October which was also 2.8% YoY.
The PCE inflation metrics serve as essential references for the Federal Reserve in formulating monetary policy, making the release of this data particularly impactful for financial markets.
Following the PCE release, gold prices surged to around $2,609 per troy ounce, marking the highest daily level. Conversely, the US dollar faced pressure; EURUSD climbed to approximately 1.04191, and GBPUSD rose to 1.25542. Conversely, USDJPY dipped to 156.338, while the previously plummeting Nasdaq index rebounded from a near 21,000 low.
The stagnant growth of core PCE certainly raises hopes for a potential decline in the future, creating possibilities for the Federal Reserve to adopt a slightly more aggressive stance in lowering interest rates next year.
As noted in the monetary policy announcement early Thursday, the Federal Reserve projected it would only reduce interest rates twice in the upcoming year. However, if the core PCE growth continues to slow, there could be room for the Fed to implement rate cuts more aggressively.
