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Market participants are eagerly awaiting for the March personal consumption expenditure (PCE) price index report from the Bureau of Economic Analysis on Friday (April 28), before the market opens.
With the next FOMC meeting in less than a week, what is regarded as the Fed's preferred gauge of inflation will be considered a key signal for assessing market expectations about the Fed's impending policy moves.
What To Know: The PCE price index grew 5% year on year in February 2023, down from 5.3% in January, and 0.3% month on month, down from 0.6% in January.
The following are predicted to be some of the most volatile ETFs in response to the March PCE figures:
Why It Is Important For Markets: March Core PCE inflation will almost certainly remain substantially over the Fed's 2% inflation target.
Markets will be paying close attention to how far the March Core PCE figure deviates from consensus predictions.
A core PCE print of less than 0.3% monthly or 4.5% annually will likely reinforce current market assumptions that the Fed's rate hike cycle will come to an end in May. This will be a relief for the markets, even though a lot of the Fed's expected shift in policy may have already been priced in.
A core PCE reading greater than 0.3% monthly or 4.5% yearly will generate considerably more uncertainty on the rate front, possibly sparking some speculation on another Fed hike in June, and so creating additional headwinds for interest-rate sensitive assets such as tech and growth equities as well as bonds, while likely favoring the U.S. dollar.
Markets have nearly fully priced in a 25-basis-point rate hike in May to 5%-5.25%, however, estimates for the June meeting are more open with a 66% chance that rates would remain unchanged in the aforesaid range and a 24% chance of another hike, according to CME Group Fedwatch tool.
Read Also: Top 5 Industrials Stocks That Could Lead To Your Biggest Gains In April
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