The highlight in today’s crowded economic release schedule was the personal consumption expenditures (PCE) report for December. The PCE inflation measure is a Fed favorite, and with the January FOMC meeting now just days away, the data carries additional weight. Overall PCE for December as well core PCE matched expectations, up +0.2% for the month. On a year-over-year basis, overall PCE was unchanged at +2.6% while the annual core PCE rate dipped from +3.2% to +2.9%, the lowest since March 2021. It isn’t clear from the annual numbers that the Fed has met its inflation target, but progress is apparent when focusing on more recent data. Over the last three months and six months, the annualized pace of core PCE has fallen to +1.5% and +1.9% respectively.

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