Gold prices just lower; monthly gains on track
Investing.com -- A measure of inflation that is closely watched by the Fed and plays a key role in the central bank’s interest rate policy is likely to resume its downward trend in the first quarter of this year, economists from Morgan Stanley (NYSE:MS) said, following fresh inflation data released Friday.
"Looking ahead, we expect short-lived sequential acceleration in 1Q25 due to residual seasonality. However, we think the 12-month pace of core PCE will resume its downward trend in 1Q25 adding to the evidence of a continuing disinflation trend," Morgan Stanley said in a note.
The core Personal Consumption Expenditures (PCE) price index, which is a closely watched measure of inflation and excludes food as well as energy, rose 0.16% month-over-month in December, bringing the year-over-year rate to 2.79%, down from 2.82% in November, the U.S. Bureau of Economic Analysis reported Friday. This resulted in an annualized inflation rate of 2.17% over the last three months and 2.28% over the last six months.
The December’s core PCE came in slightly below their expectations, the economists said, mainly due to weaker-than-expected data from "non-profits institutions serving households," a component derived from sources other than CPI or PPI.
Following the data, the economists now expects core PCE inflation to reach 2.8% for 2024 on a fourth-quarter over fourth-quarter basis, aligning with both their forecast and the Fed’s projections. For 2025, they expect a decline to 2.5%, citing potential stickiness caused by tariffs and immigration policy.
On the economic front, meanwhile, data pointing to strong consumer spending in December, but a fall in the saving rate, is stoking concerns about how the "sustainability of consumer spending growth," the economists said, at a time when wage growth is also slowing.
Private industry compensation rose a slightly softer 0.8% in December, with private wages in line with headline wages at +0.9%. In short: continued progress on wage disinflation, the economists added.