Friday’s PCE: Will the Fed Pivot?

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Okay, look. We’re all adults here, right? Except maybe the algorithms. Anyway, this Friday at 8:30 AM ET, the Bureau of Economic Analysis drops the Personal Consumption Expenditure Price Index – the PCE. It’s basically inflation, but with a fancy European name. The Fed likes it better than the CPI. Apparently, it’s more ‘comprehensive.’ Which, in Washington, always means ‘more complicated to explain to your aunt at Thanksgiving.’

Think of the CPI as the celebrity gossip of inflation – gets all the attention, but often a bit… sensationalized. The PCE? That’s the Ken Burns documentary of inflation – thorough, meticulously researched, and likely to put you to sleep if you’re not caffeinated. But the Fed? They’re the Ken Burns types. They prefer a good, solid, deeply-researched metric. They’re aiming for 2% inflation, and they’re judging everything against this PCE number. It’s like a high school English teacher grading our economic report card.

Last week, the CPI showed some cooling. Prices rose 2.4% annually in January – a little less than expected. The market, naturally, threw a tiny party. It’s like when you realize you only slightly overcooked the chicken – relief, but still a lingering sense of panic. But the PCE is the real test. If it confirms that inflation is actually… moderating… well, that’s a plot twist. It would be like finding out your boss is secretly a really nice person.

Why does any of this matter? Because the Fed has been hinting at potential rate cuts. Right now, the market is pricing in two, maybe three, cuts this year. It’s like trying to predict what your teenager will do on a Saturday night – a lot of guesswork and a high probability of disappointment. But if the PCE shows inflation is truly taming, the Fed might feel comfortable being a little more… generous. Lower rates are basically free money for businesses and consumers. It’s like finding a twenty in your old jeans – suddenly, everything seems a little brighter.

Austan Goolsbee, President of the Chicago Fed, even suggested there’s room for more cuts. Which, in Fed-speak, is basically a declaration of independence. He’s probably picturing himself as George Clooney in “Good Night, and Good Luck.” The man has a vision.

So, tune in Friday morning. Forget the coffee, skip the news headlines. Just stare intently at the PCE number. It’s not just a data point; it’s a Rorschach test for the market. Will it be a bullish breakout, a bearish correction, or just another day of sideways shuffling? Honestly, I’m placing bets on the sideways shuffle. That’s what always happens. But hey, at least we have the data to distract us from the existential dread.

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2026-02-19 18:52