The United States has released 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 grow by 2.4% year-on-year (YoY) in November, falling short of the forecast by Trading Central of 2.5% YoY, but slightly higher than the previous month’s figure of 2.3% YoY.
Meanwhile, the core PCE inflation rate was recorded at 2.8% YoY, which is lower than the anticipated 2.9% YoY, yet remains consistent with the growth rate observed in October of 2.8% YoY.
The PCE inflation metric serves as a benchmark for the Federal Reserve in formulating monetary policy, which makes the release of this data crucial for the financial markets.
Following the PCE announcement, gold prices surged to approximately $2,609 per troy ounce, marking the highest daily level. Concurrently, the US dollar faced downward pressure; the EURUSD rose to around 1.04191, and GBPUSD climbed to 1.25542. Meanwhile, USDJPY dipped to 156.338, and the Nasdaq index, which had previously plummeted near 21,000, managed to recover.
The stagnation in core PCE growth certainly raises hopes for potential decreases in the future, thereby presenting an opportunity for the Federal Reserve to adopt a more aggressive stance on interest rate cuts in the coming year.
As noted in the monetary policy announcement early Thursday morning, the Federal Reserve projected only two rate cuts for the next year. However, should the growth of core PCE continue to decelerate, there will be room for the Federal Reserve to lower rates more aggressively.
