This week’s economic data provided valuable insight into the state of the consumer and inflation. The headline Consumer Price Index (CPI) accelerated to 0.5% m/m and 3.0% y/y in January. The Core CPI, which excludes the volatile food and energy sectors, jumped 0.4% m/m and 3.3% y/y.
Against a backdrop of predominantly positive economic data this week, Treasury yields remain at the lower end of the year-to-date range, supportive of a constructive outlook for the US economy in 2025.
Progress on inflation came into focus with the Personal Consumption Expenditures (PCE) index data from December. Headline PCE was in line with consensus expectations both on a month-over-month, at 0.3%, and on a year-over-year basis at 2.6%. The Fed’s preferred gauge, Core PCE, was unchanged from the prior month at 2.8% year-over-year. Yet, Core PCE increased from 0.1% to 0.2% month-over-month, raising some concerns over the pace of slowing inflation.
