This is not good news for expectations of a moderating Fed
24 February 2023
The preferred measure of inflation for the Federal Reserve (Fed), the US Core Personal Consumption Expenditure (PCE), in January rose on the month by 0.6%, a faster rate than markets had expected at 0.4% and showed a relatively higher clip year-on-year at 4.7%. This is certainly a higher rate than the Fed would be comfortable with.
Inflation, the primary driver of market sentiment at present, while not as hot as last year, remains pretty warm. This is not good news for expectations of a moderating Fed and an extension of smaller hikes of 25 bps has to be further priced into markets with bonds and equities reacting on the day to the inflation news.
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The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.