The Federal Reserve’s preferred inflation metric is expected to cool to the slowest pace since June, but progress on taming price pressures overall will keep policymakers cautious about lowering interest rates further. The core personal consumption expenditures price index is expected to rise 2.6% in the year through January, while overall PCE inflation is likely to ease on an annual basis.
The decline in inflation will likely come from categories that were relatively tame in separate wholesale inflation data, but components that registered strong increases in the consumer price index will keep the PCE running above the Fed’s 2% target. This is a key reason why officials prefer to keep rates on hold for the time being.
In Canada, gross domestic product data for the fourth quarter is expected to show an economy picking up steam following aggressive rate cuts, but momentum may stall due to the looming trade war. In Europe, the aftermath of Germany’s election will be a focus for investors, with the pro-business CDU/CSU bloc expected to take the biggest vote share.
In Asia, the Bank of Korea will decide whether to resume the rate-cut cycle, while the Bank of Thailand is expected to hold its benchmark rate. The Reserve Bank of Australia will get consumer inflation data, and Japan will publish CPI data for Tokyo. China will report preliminary PMI data for February, and Taiwan will report preliminary GDP figures for the fourth quarter.
Overall, global economic data releases and monetary decisions in various regions will be closely watched in the coming week, with a focus on inflation, GDP growth, and central bank policies.