Yesterday's CPI and core CPI data were quite good, and the market's response was positive. Today's PPI data is not as closely watched as the CPI, but the combination of PPI and CPI data can be used to estimate the core PCE data, which is the most important data for the Federal Reserve. Powell often mentions that the target is 2%, which refers to the core PCE reaching 2%.
Currently, market expectations are optimistic, mostly below expectations. If the actual results meet or fall below market expectations, it would likely mean that the core PCE data could be lower than the previous value, which would be a good thing for the market.
However, the positive estimates are limited. The current data does not include the newly adjusted +25% tariffs. It can only be said that if tariffs are not imposed, we could see a decline in U.S. inflation, but considering the tariff issue, the current data is not very relevant.
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