PCE Inflation Preview Before Fed Decision

Table of Contents

1. Introduction
2. Why Tomorrow’s PCE Matters
3. Market Expectations & Scenarios
4. Final Takeaway Before the Fed Decision

Introduction

Tomorrow delivers the first inflation print from the BEA since the BLS figures of 24 October, where headline inflation cooled to 3%, surprising markets by rising less than expected.
Now all eyes shift to the PCE index, the metric the Federal Reserve prioritizes when assessing the true trajectory of inflation.

This release matters even more because it is the final inflation reading before the Fed’s next interest rate decision, and markets have already priced in a 25 bps rate cut following recent dovish remarks from policymakers.

Why Tomorrow’s PCE Matters

The PCE matters because it reflects:

• Real consumer purchasing patterns
• Shifts in how Americans spend and save
• The inflation dynamics the Fed trusts the most
• Policy direction for the December meeting
• Core trends stripped of volatility, ideal for gauging genuine cooling

Forecasts expect PCE to rise toward 2.80%, while MRKT projections show a possible range between 2.70% and 2.90%.

Market Expectations & Scenarios

1. PCE Above Forecast (> 2.80%)

• Indicates inflation is not cooling as expected
• Could slightly reduce the probability of a December rate cut
• Dollar likely strengthens in the short term
• Risk assets (stocks, gold, crypto) likely fall in the short term

A print above 2.90% is the only scenario that could meaningfully challenge the already-priced-in cut.

2. PCE In Line (≈ 2.80%)

• Market-neutral outcome
• Fed expectations remain unchanged
• Minimal volatility except for algo-driven reactions
• Sentiment stays dovish overall

3. PCE Below Expectations (< 2.75%)

• Reinforces the cooling inflation trend
• Strengthens expectations of a December cut
• Dollar weakens
• Risk assets and commodities extend recent rallies
• Markets lean into dovish momentum already captured by MRKT sentiment tools

Final Takeaway Before the Fed Decision

Tomorrow’s PCE is not just another data point, it is the final confirmation point before policymakers decide on rates next week.
Unless the print shocks above 2.90%, markets will likely maintain expectations for a 25 bps cut, keeping USD defensive and risk assets bid.