The Federal Reserve's primary inflation rate, the core PCE price index, is expected to ease to a seven-month low for January. Clear disinflation progress couldn't come at a better time, since it will give the Fed more leeway to respond to economic weakness, despite inflation risk from Trump tariffs and tax cuts. S&P 500 futures are higher early Friday after Thursday's sharp sell-off.
The PCE inflation data is released with the Bureau of Economic Analysis personal income and outlays report, due out at 8:30 a.m. ET.
↑ X NOW PLAYING This Is Why The Fed Is Aiming For A Neutral Rate In 2025Economists expect an overall 0.4% rise in the personal consumption expenditures price index, lowering the 12-month headline inflation rate to 2.5% from 2.6%.
The core PCE price index, which strips out volatile food and energy prices, is expected to rise 0.3% on the month. That should lower the 12-month core inflation rate to 2.6% from 2.8%.
That would match June's core inflation rate for the lowest since March 2021.
The comparison vs. January 2024, when core prices jumped 0.5% is an easy one, which is why the 12-month inflation rate is expected to fall.
Today's report also is expected to show a moderate 0.3% rise in personal income in January, Personal consumption expenditures are seen slowing to a 0.2% rise, after a strong 0.7% increase in December.
Along with the recent good news on inflation, a number of factors have contributed to higher odds for a Fed rate cut, with a cut now seen as quite likely by June. Those factors include Thursday's jump in new jobless claims, a moderation in consumer spending and uncertainty stoked by President Trump's tariff threats, which are beginning to turn to reality.
Ahead of the PCE inflation report, markets saw just 6% odds of a rate cut at the March 19 Fed meeting, according to CME Group's FedWatch tool. Those odds rise to 30% for the May 7 meeting and 73% for the June 18 meeting.
S&P 500 futures are 0.3% higher in early Friday stock market action. On Thursday, the S&P 500 slid 1.6%, falling to its lowest level since Jan. 14.
The S&P 500 is up 1.4% since Election Day.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
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