STORY: U.S. inflation continues to trend lower, according to a closely watched report Friday.
Not only is this good news for consumers, but it also underscores the belief that the Federal Reserve could begin cutting interest rates this year.
And it comes at a crucial time: The Fed is meeting next week to discuss when it might begin cutting interest rates.
The Commerce Department's consumer spending price index – the Fed's preferred indicator of inflation – showed prices rose just 0.2% in December, in line with economists' expectations.
Prices rose 2.6% throughout 2023 – a significant decline from 2022, when they rose more than double.
So-called core PCE – which excludes volatile prices as well as food and energy prices – rose a modest 2.9% last year, the smallest increase since the start of 2021.
Cooling inflation has bolstered expectations that the Federal Reserve could begin cutting interest rates as early as March.
However, the timing of the first rate cut is uncertain as the labor market and consumer spending remain strong.
Financial markets have pushed back the likelihood of the Fed's first interest rate cut until later in the spring, reflecting the economy's continued resilience. The central bank is expected to leave interest rates unchanged at its meeting next week.
Comments are closed.