US CORE PCE INFLATION PREVIEW: FEDERAL RESERVE PREFERRED PRICE GAUGE LOOKS SET FOR ANOTHER DECLINE IN DECEMBER

• The Core Personal Consumption Expenditures Price Index is set to rise 0.2% MoM and 3% YoY in December.
• Markets see a strong chance of the Federal Reserve keeping the policy rate unchanged in January and March.
• The continued cooling of PCE inflation could cause the US Dollar to remain fragile.

The Core Personal Consumption Expenditures (PCE) Price Index, the US Federal Reserve’s (Fed) preferred inflation measure, will be published on Friday by the US Bureau of Economic Analysis (BEA) at 13:30 GMT.

What to expect in the Federal Reserve’s preferred PCE inflation report?

The Core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.2% on a monthly basis in December, up slightly from a 0.1% increase recorded in November. December Core PCE is also projected to grow at an annual pace of 3%, down from November’s 3.2%. The headline PCE Price Index is forecast to rise 2.6% (YoY).

Previewing the PCE inflation report, “[W]e look for December PCE data to continue supporting the idea of inflation deceleration, with the core series advancing at a near-trend 0.2% m/m — and below the core CPI's 0.3% increase,” said TD Securities analysts in a weekly report titled “Week Ahead: US Macro Market Movers