Wall Street Banks Forecast Rising US PCE Inflation Amid Market Uncertainty

Market participants are closely watching the upcoming US Personal Consumption Expenditures (PCE) inflation data, which will be released by the Bureau of Economic Analysis on February 20. The release is expected to have a significant impact on the stock market and cryptocurrency prices, with Bitcoin, gold, and stocks trading in red ahead of the key inflation data.

The US dollar index has risen towards 98, and traders are waiting for the PCE inflation report to make their next moves. Several major Wall Street banks, including JPMorgan, Bank of America (BofA), Goldman Sachs, and Morgan Stanley, have issued their forecasts for the December PCE inflation data.

According to the forecasts, core PCE inflation is expected to rise 0.37% month-over-month (MoM) and 2.9% year-over-year (YoY). Headline PCE inflation is also predicted to increase, with some forecasts indicating an annual rate of 2.9%. The Cleveland Fed's nowcasting model predicts a year-over-year headline PCE inflation of 2.60% for January.

A rise in inflation would likely lead the Federal Reserve to keep interest rates stable at 3.50%-3.75% in March and could delay next rate cut this year. TradeFi institutions and traders have scaled back expectations for aggressive easing, but still expect two 25 bps Fed rate cuts this year.