U.S. stocks firm as core PCE beats forecasts, Q4 GDP slows

What 2.7% core PCE price index in Q4 means

The Bureau of Economic Analysis (BEA) reported that the U.S. core PCE price index ran at a 2.7% annualized pace in the fourth quarter. This measure excludes food and energy and is the federal reserve’s preferred gauge of underlying inflation.

The 2.7% quarterly annualized reading came in higher than expected, indicating that inflation pressures moderated less than hoped late in the year. Because it’s an annualized quarterly figure, it captures near‑term momentum rather than a full year’s change.

Why it matters for the Federal Reserve’s 2% target

The Fed targets 2% inflation over time, and a 2.7% annualized core PCE print remains above that goal. As reported by MarketScreener/Alliance news, the core reading was above many forecasts near 2.6%, and headline PCE ran about 2.9% annualized in Q4; the report added that this points to lingering inflation persistence.

Policy is set “data by data,” and officials have said they need greater confidence that inflation is moving sustainably toward 2% before easing. A stickier quarterly pace complicates that assessment, especially if services inflation remains slow‑moving.

Jerome Powell, Chair of the Federal Reserve, has recently stressed that inflation is still above target and noted tariff effects on goods prices. According to Yahoo Finance UK, he suggested underlying inflation could be “just a bit above 2%” once tariff impacts fade.

A 2.7% annualized core PCE likely keeps policy restrictive for longer until disinflation progress is clearer. That stance would be consistent with waiting for additional evidence across multiple reports before considering any rate reductions.

Markets have been sensitive to the growth‑inflation mix. According to Investors Business Daily, the Fed’s primary inflation gauge ran hot while fourth‑quarter GDP growth came in well below forecasts, a combination that can nudge investors to push back expectations for policy easing.

At the time of this writing, Bitcoin (BTC) trades near 68,228, with sentiment flagged as bearish and 11.63% volatility in the provided metrics. This is contextual background only and does not imply any policy or investment signal.

Annualized vs year-over-year core PCE: reading the signal

How annualized quarterly differs from year-over-year measures

Annualized quarterly core PCE scales one quarter’s change to a yearly rate, emphasizing near‑term momentum. Year‑over‑year compares prices to the same quarter a year earlier, smoothing short‑term swings but reacting more slowly to turning points.

Why this difference matters for policy and markets

When quarterly annualized readings run hotter than year‑over‑year, it can flag an emerging re‑acceleration. Policymakers watch both to balance recent inflation dynamics against longer‑run trends before adjusting the policy stance.

FAQ about core PCE

How does the core PCE reading compare with the Fed’s 2% target and economists’ expectations?

It’s above the 2% goal and higher than many forecasts near 2.6%, as reported by MarketScreener/Alliance News.

Will the Federal Reserve delay interest rate cuts because core PCE ran hotter than expected?

Officials seek “greater confidence” inflation returns to 2% before easing, indicating potential delays are possible depending on incoming data.