Inflation gauge favored by Fed showed price growth picked up in December
Published On Jan 31, 2025, 8:34 AM
The article discusses recent inflation data released by the Commerce Department, indicating that the Federal Reserve's preferred inflation gauge, the personal consumption expenditures (PCE) index, rose by 0.3% in December compared to the previous month and 2.6% year-over-year. Core PCE, which excludes food and energy prices, increased by 0.2% monthly and 2.8% annually. The Fed has been focused on keeping inflation around a 2% target as it deliberates on future interest rate policy. The current inflation data indicates persistent price pressures, particularly in services, despite a moderating trend expected in the spring.
Stock Forecasts
XLY
Negative
The continued rise in PCE suggests the potential for further Federal Reserve intervention in monetary policy, particularly if inflation does not begin to decline. Higher inflation can lead to increased interest rates, which negatively impact sectors reliant on consumer spending and growth.
XLP
Positive
The focus on inflation rates may lead investors towards defensive stocks or those that traditionally perform well during inflationary periods. Consumer staples, represented by the XLP ETF, are considered more resilient against inflation, as people prioritize essential spending even in tougher economic conditions.
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