• PCE
• price index
• the Fed's preferred measure of inflation and a key factor in rate decisions

The core personal consumption expenditure index, which excludes volatile food and energy prices, rose 2.8% in November, below the expectation of 2.9%.¹⁾

That trend continued this morning, when the Fed’s preferred inflation measure, core PCE, was shown to have increased an “as expected” 0.2% last month. That was pretty good, but on an annual basis, the index increased by 2.8%, more than expected and well above the central bank’s 2% target.²⁾

A soft PCE price index reading could trigger rate cut bets. And, lower rates will support the outlook for economic growth and energy demand.³⁾

The PCE, meanwhile, assigns shelter a much lower weight, which helps explain why it’s trended lower than the CPI.⁴⁾

Policymakers’ preferred inflation gauge — the personal consumption expenditures price index — probably stayed elevated in March, according to data due in the coming week.⁵⁾

The core metric, which strips out energy and food, is expected to rise 0.3% from the prior month after a similar gain in February.⁶⁾

While much of the inflation damage has been most evident in the consumer price index — which accelerated to 3.5% in March from a year earlier — the Fed’s preferred metric is the personal consumption expenditures price index. The PCE has been running closer to the central bank’s 2% target — registering 2.5% in February — but progress on that gauge has also stalled.⁷⁾

in case U.S. PCE reading comes in above expectations, a temporary top might have been found for oil

Strong Economic Growth: An above-expectations PCE reading indicates robust consumer spending, which typically accompanies strong economic growth. In such a scenario, there might be concerns about inflationary pressures, prompting central banks to consider tightening monetary policy to cool down the economy.

Impact on Oil Demand: Tightening monetary policy can dampen economic activity, potentially reducing demand for oil as businesses and consumers cut back on spending. This decrease in demand could put downward pressure on oil prices.

Speculative Behavior: Traders and investors may interpret the strong PCE reading as a signal to take profits or adjust their positions, especially if they believe that the current oil price level has reached a temporary peak.

Market Dynamics: Market sentiment and speculative activity can often lead to short-term fluctuations in oil prices, even in the absence of significant changes in supply and demand fundamentals. Therefore, the statement suggests that an above-expectations PCE reading could trigger a temporary correction or consolidation phase in oil prices.

Overall, the statement implies that while a strong PCE reading may initially support oil prices due to increased demand expectations, it could also prompt market participants to reassess their positions and potentially lead to a temporary peak in oil prices as market dynamics adjust.