The personal consumption expenditures price index (PCE) increased by 0.2% on the month and showed a 12-month inflation rate of 2.3%, matching expectations. Core inflation also rose 0.3% monthly and reached an annual reading of 2.8%, as forecast.
Spending on goods and services grew 0.4% in October, while personal income jumped 0.6%, exceeding the predicted 0.3% rise. The PCE inflation rate has been above the Federal Reserve’s target of 2% since March 2021, prompting aggressive interest rate hikes.
Despite this, traders believe the Fed will approve a rate cut in December, with odds at 66%. Stocks reacted mixedly to the release, with the Dow Jones Industrial Average up 100 points, but the S&P 500 and Nasdaq Composite were both negative. Treasury yields fell as investors adjusted their expectations.
The inflation rate has dropped significantly since the Fed’s interest rate hikes began, but it remains a concern for households, particularly those on lower incomes. Consumer spending was solid in October but slowed from September, while personal saving rates slipped to 4.4%, tied for its lowest since January 2023.
The Fed closely monitors various indicators to gauge inflation and uses the PCE index as its main tool. Core inflation remains a preferred long-term gauge, but both numbers are considered when making policy decisions. The release follows consecutive rate cuts by the Fed in September and November, which totalled three quarters of a percentage point.
Source: https://www.cnbc.com/2024/11/27/pce-inflation-october-2024.html