Inflation Setbacks Expected in January PCE Data, Delaying Fed Rate Cuts

The Personal Consumption Expenditures (PCE) Index likely accelerated to 0.3% month-over-month inflation in January, indicating setbacks in the fight against inflation.

Core PCE inflation excluding food and energy prices is expected to have risen 0.4% in January, double the 0.2% pace in December.

PCE is the Fed's preferred inflation measure, so a rise would likely delay interest rate cuts and higher borrowing costs.

Financial markets are betting the first rate cut will now come in June rather than March.

Even if there is a near-term setback, inflation is still expected to fall in coming months as rental inflation comes into the data.