All eyes are on the Fed’s preferred inflation gauge, out this week

Investors are closely watching the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures index — set to be released this week. The data could reinforce or challenge expectations for a rate cut later this year, the Financial Times writes. While the index is expected to tick up 0.3% m-o-m in January, slightly above December’s 0.2%, the annual rate is forecasted to dip to 2.6% from 2.8%, according to a Reuters poll.

The market is already jittery after January’s hotter-than-expected consumer price index, which saw core inflation rise to 3.3%, surpassing forecasts of 3.1%. The inflation surprise reshaped rate cut expectations, with futures traders now pricing in a quarter-point cut by September, and a 70% chance of another cut before year-end.

The risk: Inflation could prove stickier than expected. “Despite our expectation that inflation will slow solidly over the next couple of months, we feel the risks are skewed to the upside of our forecast over the next year or so — particularly from current and proposed administration policies,” UBS economist Alan Detmeister said.

Policymakers are also signaling caution: Atlanta Fed President Raphael Bostic flagged the complexity of trade, immigration, and regulatory shifts, calling them “crosscurrents” that complicate decision-making. Meanwhile, St. Louis Fed President Alberto Musalem warned that inflation could remain high even as economic growth slows, reinforcing concerns that the Fed’s “modestly restrictive” stance on interest rates could stick around longer than markets anticipate.

The real test: The Fed’s inflation target remains at 2%, but the path back to that level is uncertain. While investors are penciling in rate cuts by September, some economists argue the Fed could stay put if price pressures persist. “This is no time for complacency,” Bostic said.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning — the Shanghai Composite is down 0.2% and the Kospi is down 0.8%, meanwhile the Hang Seng is looking at gains of 0.2%.

THE CLOSING BELL-

The DFM fell 0.4% on Friday, on turnover of AED 541.4 mn. The index is up 3.9% YTD.

In the green: International Financial Advisors (+10.1%), Union Properties (+9.1%) and Depa Limited (+6.3%).

In the red: National International Holding Company (-6.9%), Al Salam Sudan (-2.9%) and Watania International Holding (-2.8%).

Over on the ADX, the index stayed flat, on turnover of AED 1.2 bn. Meanwhile, Nasdaq Dubai closed down 0.4%.

CORPORATE ACTIONS-

Burjeel Holding’s management is mulling a share buyback of up to 10% of its share capital, pending the green light from shareholders and the UAE’s Securities and Commodities Authority, according to an ADX disclosure (pdf). The move will be funded through the Group’s operating cash flow and executed via open-market purchases.

Burjeel is evaluating several options for the repurchased shares, including resale depending on market conditions, allocation to long-term incentive plans, and other capital management strategies.

REMEMBER- The company expects revenue growth this year to come in the mid-teens on the back of the conversion of investments and operational efficiencies, growing its income before tax by a 25% compound annual growth rate over the next four years.