In this morning’s data, Personal Income was flat at 0.0% in January, higher than expected, and Personal Spending increased 2.1% in January, also higher than expected and a rebound from the negative reading the previous month. Meanwhile, the PCE Deflator, a key measure of inflation monitored by the Federal Reserve, increased 6.1% in January on an annual basis. The Core PCE Deflator, which excludes food and energy prices, remains elevated growing 5.2% in January on an annual basis, still far above the Federal Reserve’s target. Overall, flat income with an increase in spending as inflationary measures remain high. However, savings did increase in previous months given stimulus efforts creating some cushion for consumers at the start of this year. Additionally, as we move beyond the impacts of the Omicron variant, individuals will likely be eager to get out and enjoy services that have been neglected during the pandemic, possibly giving some relief to prices on goods that have been in highest demand. The Federal Reserve likely remains on track to start in March with their plans for tightening policy given high inflation measures, even with the potential impact of geo-political tensions which have escalated in recent days. In all, the 10-year US Treasury yield ticks higher and equity futures are also higher as we head into the market open.
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