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US inflation data aligns with market predictions, fuels rate cut speculation
The US PCE Price Index rose 0.3% in January 2024, matching forecasts and fueling optimism for potential Federal Reserve rate cuts amid slowing core inflation to 2.8%.
US PCE Index meets forecasts with a 0.3% rise; core inflation dips to 2.8%.
Markets upbeat on Fed rate cut prospects after inflation report.
German inflation drops to 2.5%, indicating easing pressures.
Canada's GDP up 0.2% in Q4, rebounding with export boost.
In a closely monitored release by the Bureau of Economic Analysis, the US Personal Consumption Expenditure (PCE) Price Index observed a 0.3% increase in January 2024, precisely meeting market forecasts. This uptick, following a revised 0.1% rise in December, underscores a steady but cautious inflationary trend within the economy. The core PCE Price Index, a critical measure excluding volatile food and energy prices, similarly ascended by 0.4%—marking its most significant leap since February of the previous year and aligning with economists' expectations. The annual core inflation rate slowed for a 12th straight month to 2.8% from 2.9%, a fresh low since March 2021, and in line with forecasts of 2.8%.
This inflationary data, seen as a barometer for consumer spending health, has sent a wave of optimism through financial markets. Stock futures witnessed an uptick, while bond markets pared losses, buoyed by the anticipation that the Federal Reserve might embark on interest rate reductions as soon as the second quarter. The alignment of the PCE figures with predictions has offered a reprieve to investors, alleviating concerns of an accelerated inflationary pace that could prompt the Fed to defer or forgo anticipated rate cuts.
German inflation eases, surpassing expectations
Meanwhile, in Europe, Germany reported a notable deceleration in its inflation rate for February 2024. Preliminary data indicated a fall to 2.5% year-on-year, descending from 2.9% in January and surpassing analysts' projections of 2.6%. This decline to the lowest inflation rate since June 2021 signals a potential easing of price pressures in Europe's largest economy, edging closer to the European Central Bank's (ECB) target of 2.0%.
Canada's economy finds footing with Q4 growth
In North America, the Canadian economy showed signs of resilience, registering a 0.2% growth in the fourth quarter of 2023. This positive adjustment marks a rebound from a slight 0.1% contraction in the previous quarter, propelled by an uptick in exports. The return to growth underscores the underlying strength of the Canadian economy, despite facing headwinds from global economic uncertainties and tightening interest rates.
