Eyes turn to critical inflation indicator from the US

High risk appetite is being observed in the markets following the downward revision of US growth data and expectations of a decline in PCE inflation.

While American indices rallied following the growth data, the S&P 500 and Nasdaq 100 closed the day with gains of over 1 percent. Futures for both indices retreated slightly in the morning hours.

An optimistic atmosphere is also visible in the Asia-Pacific region. As the MSCI Asia Pacific prepares to record its third rise in the last four trading days, the Japanese Topix and Chinese CSI 300 are in positive territory.

With the approach of the Christmas holiday, the trading band in the bond market has narrowed significantly, while the US 10-year bond yield rose by one basis point to 3.90 percent. The Bloomberg Dollar Index, which fell 0.6 percent on Thursday, is flat at 1,220 points this morning.

Inflation indicator closely watched by the Fed

The core personal consumption expenditures (PCE) inflation data, the indicator preferred by the Fed for its inflation target, will be released today at 16:30.

The core Personal Consumption Expenditures (PCE) price index is estimated to have slowed to 3.3 percent in November from 3.5 percent in October on an annual basis. The six-month annualized core PCE data is expected to fall to the Fed's 2 percent target, while headline PCE is expected to drop from 3 percent to 2.8 percent.

This downward trend in core PCE is among the most important justifications for the expectation of a 75-basis-point interest rate cut, which is the median forecast of Fed members for 2024. Bloomberg Economics economists Andrej Sokol and Bjorn Van Roye state that the data will support the view that inflation has entered a cooling process.

According to economists who estimate that US growth will slow to 1.3 percent in the fourth quarter following the confirmation of third-quarter growth at 4.9 percent, interest rate hikes have begun to show their impact on the economy.