A key inflation report scheduled for release Thursday evening Beijing time is expected to show that U.S. inflationary pressures remain stable, further explaining why Federal Reserve officials continue to be cautious regarding interest rate cuts. According to forecasts from FactSet, the Fed's most closely watched inflation gauge, the core PCE price index for November, is projected to rise 0.2% month-over-month and 2.8% year-over-year; the headline PCE is also expected to increase 0.2% monthly, with an annual gain of 2.8%. Should these predictions hold true, it would indicate that inflation is moving "sideways" at a level significantly above the Fed's 2% target.

Although some indicators suggest underlying inflationary pressures are cooling gradually, the core PCE typically exhibits smoother fluctuations compared to the Consumer Price Index (CPI). Data shows the CPI held steady with a 2.7% year-over-year increase in December 2025. Citigroup economists noted that core PCE inflation ran hot in the final months of 2025 but displayed characteristics of being "sticky rather than accelerating."

Simultaneously, data disruptions caused by last autumn's government shutdown continue to affect the November readings, and seasonal adjustments may also lead to revisions of recent data in the coming months. However, signs of disinflation are accumulating. Wage growth has noticeably slowed, with the Atlanta Fed's wage growth tracker indicating the annual increase has nearly returned to pre-pandemic levels.

This cooling in wage growth makes it more difficult for services inflation to remain elevated, especially against the backdrop of anticipated further declines in housing costs this year. This situation forces Fed officials to weigh conflicting signals: while inflation is not worsening, its pace of deceleration is insufficient to clearly support near-term rate cuts.

As data for December and January will test whether inflation "stickiness" persists, policymakers are likely to view Thursday's report as an important reference but will not base policy decisions directly on it. The November PCE report, scheduled for release at 10 a.m. ET Thursday (11 p.m. Beijing time), is expected to confirm that the U.S. continues to make progress toward price stability, albeit at a pace not yet fast enough to prompt a policy shift, meaning the Fed will maintain its "wait-and-see" stance.

In the markets, investors currently assign a probability as high as 95% that the Federal Reserve will keep interest rates unchanged at its policy meeting next Wednesday.