Analysis: Tonight's PCE may exhibit an anomaly not seen in decades, and the Federal Reserve's rate cut path faces another obstacle.

Odaily Planet Daily reports that at 8:30 PM Beijing time on Friday, the United States will release the January PCE Price Index. Market expectations are that the PCE data will increase by 2.9% year-over-year, unchanged from the previous value, and rise by 0.3% month-over-month, slowing from last month’s 0.4%. On the core side, the market expects the core PCE Price Index to accelerate slightly to 3.1% year-over-year, the largest increase since April 2024, with the month-over-month growth remaining at 0.4%. As the “ace” data from the U.S. Bureau of Economic Analysis, the PCE Price Index directly references CPI data across several price categories. After the latest CPI data was released, economists quickly revised upward their forecasts for the February core PCE Price Index, which will be announced on April 9. Several economists expect this index to increase by 0.4% for the second consecutive month, with some even prepared for a larger increase.

The Trump administration has been heavily emphasizing the CPI report, claiming that price pressures have been contained and that the Federal Reserve should cut interest rates significantly. However, hawkish members within the Fed point to the PCE indicator to counter that inflation is still well above the 2% target set by policymakers, by a full percentage point. Economists at U.S. banks also pointed out that while CPI data is moderate, PCE inflation does not provide a stronger reason for rate cuts, especially considering upside risks from oil prices. This puts the Fed in a real dilemma. A softening labor market should support rate cuts, but if PCE remains strong and energy and food prices are driven up by war-related shocks, officials will find it difficult to justify restarting an easing cycle. (Jin10)