US PCE Inflation in Downtrend, But FED Not In Rush to Cut Rates

So, both inflation measures, the CPI (Consumer Price Index) and the PCE are showing a declining trend, with the PCE accelerating the decline. However, the FED doesn’t seem in a worry to start reducing interest rates, specially with the US consumer weakening and sectors or industries directly connected with them are also weakening. The FED San Francisco president Mary Daly who will be a voting member next year popped out quickly, keeping up the rhetoric of ‘higher-for-longer”.

Comments from the SF Fed President

1. Positive Outlook on PCE Data:

   • Daly stated that the recent PCE data is ‘good news’ but emphasized that the Federal Reserve’s work is not finished yet.

2. Monetary Policy Impact:

   • She acknowledged that it’s taking longer for the current policy to have its full effect, but it’s indeed working as intended.

3. Future Actions:

   • Daly mentioned that she is considering various scenarios and the Fed will respond accordingly. It’s still too early to determine specific actions.

4. Inflation Trends:

   • The recent inflation data indicates a cooling trend, suggesting that the current policy is effective.

5. Impact of Generative AI:

   • While she anticipates that generative AI will boost productivity, it’s premature to make definitive predictions about its impact.

6. Inflation Outlook:

   • Daly predicts that inflation might continue to print above 2%, potentially through 2025.