The Personal Consumer Expenditures (PCE) was published yesterday for the U.S. economy. This is the Fed’s preferred measure of inflation. It came out lower than expected at 2.6%, and perhaps it was too good. The fact that this indicator has been trending down since July ‘22, and it’s now entering the 2ish zone, might be behind the Fed’s announcement of three rate cuts in the new year. It’s an indication of normalization, but with the risk of having overdone it, creating a problem on the other end, where demand may have been oppressed too much. Holidays sales will be important to understand if consumption is still strong, or if high rates, affecting loans, credit cards, car leases etc, are starting to make a serious dent on the economy.
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