The US February PCE report will be released tonight, and the market expects the Federal Reserve to maintain a high interest rate policy environment in April.

On April 9th, the market generally predicts that the February Personal Consumption Expenditures (PCE) Price Index, to be announced tonight at 8:30 PM, will be significantly higher than the Fed's 2% long-term inflation target, which may force the Fed to continue its high interest rate policy at the April monetary policy meeting.

Meanwhile, the core PCE, one of the key indicators the Fed uses to measure inflation levels (excluding volatile food and energy prices), is expected to increase by 0.4% month-over-month in February (previously 0.4%), indicating strong inflation stickiness in the market.

Faced with still stubborn inflation data, the prospects for the Fed to cut interest rates are becoming increasingly bleak. Currently, the CME FedWatch Tool shows that over 98.4% of traders expect the Fed to keep the federal funds rate in the 3.50%-3.75% range at the April 29th meeting, which may also mark the third consecutive time the Fed has kept rates unchanged.

However, just a month ago, about 40% of investors bet that the Fed would cut rates significantly before September 2026; now, nearly 90% of participants have shifted to a wait-and-see stance, believing that the Fed's rates will remain at current high levels until the end of the third quarter of this year.

Overall, if tonight's PCE report confirms the persistence of inflation, market expectations for a "later, smaller" rate cut this year will be fully validated.

#PCE #Inflation