Home PoliticsAmerica Interest Rates, Inflation and The Fed

A crucial measure of inflation, used by the US Federal Reserve to guide interest rates, showed a further easing last month due to declining energy and goods prices, as revealed by government data on Thursday.

In October, the annual Personal Consumption Expenditures (PCE) price index increased by 3.0 percent, a decrease of 0.4 percentage points from the previous month, according to the Commerce Department. Stripping out volatile food and energy prices, the core inflation also slowed to an annual rate of 3.5 percent, aligning with economists’ expectations.

Personal incomes also saw a slowdown in October, rising by 0.2 percent from September. The data is encouraging for the Fed, which recently maintained its key lending rate at a 22-year high, aiming to bring inflation firmly back to the long-term target of two percent without triggering a damaging recession.

Policymakers at the central bank, aiming for a “soft landing,” where inflation is reduced without causing a downturn, have expressed optimism about achieving this delicate balance. A Fed survey released Wednesday indicated a slowing US economy and a cooling job market, signaling a potential soft landing.

On a monthly basis, PCE inflation remained nearly flat in October, while core PCE rose by 0.2 percent from September. Energy prices fell by 2.6 percent, and goods prices declined by 0.3 percent from the previous month. Monthly PCE inflation stayed positive with a 0.2 percent increase in both services and food prices.

The October PCE data reinforces expectations that the Fed will maintain interest rates for the third consecutive meeting in mid-December. Rubeela Farooqi, Chief US Economist at High Frequency Economics, noted that sustained easing in price pressures will likely support a steady policy stance. She anticipates the Fed’s next move could be a rate cut, possibly by the middle of next year. New York Fed President John Williams suggested that the Fed’s rate-setting committee has reached a restrictive monetary policy stance. He predicted continued economic growth slowing next year, indicating that maintaining a restrictive stance for some time would be appropriate to restore balance and bring inflation back to the two percent goal on a sustained basis. Williams stated that the Fed is likely at or near the peak level of the target range for the federal funds rate, referring to the benchmark lending rate. Futures traders currently assign a 96 percent probability that the Fed will stand firm on December 12-13, according to CME Group data.

Shayne Heffernan

You may also like

logo-white

Your Trusted Source for Capital Markets & Related News

© 2024 LiveTradingNews.com – For The Traders, By The Traders – All Right Reserved.

The information contained on this website shall not be construed as (i) an offer to purchase or sell, or the solicitation of an offer to purchase or sell, any securities or services, (ii) investment, legal, business or tax advice or an offer to provide such advice, or (iii) a basis for making any investment decision. An offering may only be made upon a qualified investor’s receipt not via this website of formal materials from the Knightsbridge an offering memorandum and subscription documentation (“offering materials”). In the case of any inconsistency between the information on this website and any such offering materials, the offering materials shall control. Securities shall not be offered or sold in any jurisdiction in which such offer or sale would be unlawful unless the requirements of the applicable laws of such jurisdiction have been satisfied. Any decision to invest in securities must be based solely upon the information set forth in the applicable offering materials, which should be read carefully by qualified investors prior to investing. An investment with Knightsbridge is not suitable or desirable for all investors; investors may lose all or a portion of the capital invested. Investors may be required to bear the financial risks of an investment for an indefinite period of time. Qualified investors are urged to consult with their own legal, financial and tax advisors before making any investment. Knightsbridge is a private investment firm that offers investment services to Qualified Investors, Members and Institutions ONLY. Qualified Investors are defined as individuals who have met those Qualifications in the relevant jurisdictions. Members are defined as individuals who have been accepted into the Knightsbridge membership program. Institutions are defined as entities such as banks, pension funds, and hedge funds. If you are not a Qualified Investor, Member or Institution, you are not eligible to invest with Knightsbridge. All investments involve risk, and there is no guarantee of profit. You may lose some or all of your investment. Past performance is not indicative of future results. Knightsbridge is not a registered investment advisor, and this disclaimer should not be construed as investment advice. Please consult with a qualified financial advisor before making any investment decisions. By accessing this website, you agree to the terms of this disclaimer. Thank you for your interest in Knightsbridge.