Following a surge in U.S. stocks to record highs propelled by in-line inflation data, attention turned to the release of the U.S. Personal Consumption Expenditures (PCE) report. Despite expectations, the report failed to alleviate broader concerns regarding disinflationary trends, reinforcing forecasts for potential rate cuts.
As anticipation builds for potential rate adjustments in the coming year, discussions surrounding the implications of the PCE inflation figures continue. This sentiment bodes well for non-U.S. dollar assets and Asian equities, where signs of economic growth persist.
Treasuries maintained stability after experiencing gains for two consecutive sessions, with support coming from indications of softening in the labor market, as reflected in jobless claims data. Traders also attributed the bond market’s resilience to the possibility of short covering.
Federal Reserve Bank of San Francisco President Mary Daly reiterated officials’ readiness to lower interest rates as necessary, highlighting the strength of the economy but emphasizing the absence of urgent rate-cutting imperatives. Conversely, Atlanta Fed President Raphael Bostic suggested the possibility of rate cuts commencing this summer.
Cleveland Fed President Loretta Mester acknowledged the need for continued efforts to address inflationary pressures, despite the data from Thursday failing to alter her expectation of three interest rate cuts by the Fed this year.