MACRO: Key Fed inflation gauge highest in 38 years

6:25 PM 28 January 2022

Fed's favorite inflation indicator - Core PCE Deflator rose by 4.9% YoY in December, the most since September 1983 and slightly above analysts’ estimates of 4.8%, adding to expectations that the US Federal Reserve will be hiking interest rates in March. On a monthly basis, PCE prices advanced 0.4 percent and the core index was up 0.5 percent.

Core PCE Deflator jumped more than expected to +4.9% YoY, its highest since September 1983. Source: Bloomberg via ZeroHedge

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Meanwhile, employment costs increased 4% from a year ago, the fastest in the 20-year data history, though the quarterly rise of 1% was less than expected.

Earlier this week, central bank policymakers indicated they are willing to begin raising interest rates as soon as March. Today's data put more pressure on FED as markets expect five quarter-percentage point increases this year for benchmark short-term borrowing rates.

Investors are now pricing in 5 full rate-hikes by the end of 2022. Source: Bloomberg via ZeroHedge

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