The 0.28% m/m rise in core PCE prices in January was a big improvement on last year’s 0.5% m/m gain, but the 2.6% annual core inflation rate is still too hot for the Fed’s liking and, with inflationary tariff measures pilling up, we stand by our view that rate cuts are off the table this year. The Fed’s job becomes trickier if January’s sharp decline in consumption was a sign of consumer strength buckling, but some of it can be attributed to unseasonably severe winter weather.
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