The Fed prefers the Personal Consumption Expenditures (PCE) as a gauge of inflation. The PCE index grew 2.6% year-over-year in December as expected.

The Core PCE, which excludes food and energy, grew 2.9% down from 3.2%.

 During the December Fed press conference, Powell told Yahoo Finance’s Jennifer Schonberger that the Fed would want to be “reducing restriction on the economy” well before inflation hits 2%.

The Bond Market is holding tight and hanging onto the rate improvements so far this year.