KPMG economist Swonk forecasts hot PCE report, potential Fed rate hike

Photo: Tom Fisk / Pexels Diane Swonk, Chief Economist at KPMG, has forecasted a significant increase in the U.S. Personal Consumption Expenditures (PCE) price index, particularly in services inflation, following the recent Consumer Price Index (CPI) report. Swonk suggests that this could prompt the Federal Reserve to consider a half-point interest rate hike. The forecast is drawing attention as the PCE index is the Fed’s preferred gauge for inflation. The recent CPI data showed a 0.4% month-over-month increase, consistent with prior months, intensifying the focus on the upcoming PCE report and its potential implications for monetary policy. Key Takeaways Swonk’s prediction appears to suggest a stronger-than-expected PCE report, raising concerns about persistent inflation. Market pricing implies increased likelihood of at least one Fed rate hike in 2026, reflecting Swonk’s expectations. This development is consistent with market participants anticipating further tightening by the Federal Reserve. What to Watch Observers will be closely monitoring the release of the upcoming PCE report to gauge the potential for heightened inflationary pressures. Any significant deviation in the PCE ...