Fears of a stock market crash are swirling ahead of two major potential triggers coming this Friday, March 29. Indeed, the Federal Reserve’s favorite inflation gauge releases Friday morning, preceding commentary from Fed Chair Jerome Powell just hours later.
What does this mean for the stock market?
Well, if history is any indicator, probably not too much. Just a week out from the Fed’s policy meeting, it’s unlikely that Powell’s attitude will shift too much, assuming there isn’t a grave jump in inflation evident in the Personal Consumption Expenditures (PCE) report.
Powell adopted a relatively dovish tone at the press conference following the Fed decision. The Fed Chair held a fairly optimistic outlook on inflation progress thus far and maintained expectations for three rate cuts to come later in the year:
“We believe that our policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”
While he warned that economic data could stand to slow the process, that’s pretty much par for the course for Powell. Expect the Fed Chair to hold onto this demeanor come Friday.
Stock Market Crash Fears Loom Large Ahead of PCE Inflation Report
The PCE report is the major point of interest come Friday. The February PCE is expected to follow a similar trajectory to the Consumer Price Index (CPI) report released earlier this month.
If you recall, the February CPI came in hotter than expected, with inflation jumping 0.4% month-over-month, putting inflation at a 3.2% annual rate, higher than forecasts of a 3.1% annual increase.
Energy prices proved the difference maker in the CPI, swinging up 2.3% in the second month of the year, snapping a four-month deflationary streak for the inflation category.
Bloomberg expects the PCE will come in unchanged in February, reflecting an annual inflation rate of 2.4%. It predicts the core PCE, which excludes the volatile Food and Energy categories, will climb 0.2%, reflecting 2.6% inflation year-over-year.
Now, the major concern is that inflation comes in notably hotter than projections. This would put further pressure on the Fed to keep rates higher, a scary notion for Wall Street. Should this happen, Powell may attempt to stabilize expectations by taking a more hawkish tone this Friday.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
