US PCE Print: Key Analysis with Bessent Context

The Fed’s November 7 decision cut rates by 25bps to 4.50-4.75%, signaling progress toward the 2% inflation target but maintaining caution due to persistent inflation risks. While October labor data appeared weak, it was attributed to temporary factors like hurricanes and strikes, leaving core metrics stable. The PCE data and recent CPI print support expectations for one more 25bps cut in December, aligning with Fed guidance, but that is a long way off the 3 or 4 rte cuts that STIR markets saw earlier this year.

Scott Bessent’s nomination as UST Secretary introduces a pro-growth “triple-3” policy focus (3% GDP, deficit, and oil production), likely supportive of USD strength in the near term. However, tariff rhetoric could increase market volatility, especially if phasing strategies evolve into broader measures targeting China and Europe. Near-term USD bullishness persists, but risks tied to deficit reduction and trade policy could limit gains.

This week’s US PCE print will be crucial in confirming the Fed’s outlook on inflation and its alignment with recent CPI and labor data. With inflation trending toward the 2% target, a softer PCE outcome would reinforce expectations for a December rate cut, further supporting the Fed’s cautious easing approach. However, a stronger-than-expected print could challenge this view, potentially delaying the Fed’s cut and boosting USD strength. Additionally, Scott Bessent’s pro-tariff policies may amplify inflation risks, adding further significance to this data release.