Fed Inflation Stays at Target as Growth Slows; Markets Eye March Rate Cut
• The Fed's core PCE inflation rate stayed at 2% annualized in Q4, remaining at the Fed's target level. This could lead to further cooling of inflation.
• U.S. GDP growth slowed to 3.3% in Q4 from 4.9% in Q3, but exceeded forecasts of 2% growth. Consumer spending and business investment contributed.
• Jobless claims rose moderately but remain low overall.
• Markets are now pricing in nearly 50% odds of a March Fed rate cut, up from 41% before the data. Odds of cuts later in 2023 also rose.
• After the data, stocks rose slightly and the 10-year Treasury yield dipped, reflecting increased expectations of a dovish Fed pivot.