Jerome Powell on inflation: Markets brace for PCE data; Wall Street on edge

The US stock market is on alert this week as investors wait for the new Personal Consumption Expenditures Price Index. This is the inflation measure that the Federal Reserve watches most closely. It will be the first update since late September, making it important for traders who want clear signals on future interest rates. Economists expect the headline PCE number to be around 2.8%. The core index, which removes food and energy, is expected to stay near 2.9%. These numbers will show whether inflation is continuing to cool or staying firm as the year ends. The timing also matters. The Federal Reserve will meet in December to decide the next steps for interest rates. This week’s data will be one of the final inputs before that meeting.

In recent weeks, markets have reacted strongly to even small changes in inflation expectations. Stock indexes have moved up and down as traders try to guess the Federal Reserve’s next move. Delays in other government reports have made this PCE update even more important, as fewer data points are available. If the report shows softer inflation, Treasury yields may fall. This would ease pressure on stocks, especially technology and growth companies. These sectors often rise when borrowing costs look likely to drop in the future. But if the number comes in hotter than expected, markets could turn lower quickly. Higher inflation would suggest that the Federal Reserve may need to keep interest rates high for longer. Sectors that depend on stable financing, such as housing, financials, and semiconductors, may feel the most pressure.

Federal Reserve Chair Jerome Powell has repeated that the central bank will rely on data and not fixed timelines. Inflation above the 2% target makes it harder for the Fed to ease monetary policy. If Friday’s report suggests that inflation is stuck near 3%, policymakers may choose to keep conditions tight well into 2026. The December meeting will set the tone for the coming year. A cooler PCE reading may allow the Fed to signal a softer stance. A hotter number may lead to a message of caution, which could unsettle markets.