Inflation in the US climbed a bit higher to October, with the federal reserve’s preferred inflation gauge-PCE price index-advancing 0.2 percent from September and 2.3 percent from the level of a year ago. Its annual rate was as had been expected and was more elevated than 2.1 percent in September. The core rate, including prices for food and energy but excluding volatile food and energy prices, rose at a faster pace, lifting 0.3 percent for the month and arriving at a 2.8 percent annual rate, both above projections.
The Commerce Department released the October inflation report on Wednesday and it was here that the primary driver of monthly inflation- services prices, which increased by 0.4% – could be found. Goods fell by 0.1%. Food costs were essentially unchanged, while energy costs slid 0.1%.
The uptick in core inflation, however, did little to dampen market hopes for the Fed to move down the rate-cutting route. Traders had increased bets that the Federal Reserve was done cutting interest rates for a December cut. The prospect of a 0.25 percentage point cut stood at 66% as per CME Group’s FedWatch tool, after it reduced the rate by an aggregate 0.75 percentage points over September and November.
The Federal Reserve has tried for a 2% yearly inflation rate, something which it has not reached since inflation surged in 2021. At its highpoint, the PCE inflation rate hit 7.2 percent in June 2022 that led the Fed into multiple aggressive rate hikes. Now, since inflation has eased, the central bank is pondering how far it can go in cutting interest rates to pursue the twin objective of stimulating growth without furthering inflation.
The report also showed consumer spending is pretty robust: current-dollar expenditures rose 0.4% in October as expected. Personal income was more than the forecasted gain of 0.3%, rising 0.6%. But personal saving rate fell to 4.4%, the lowest since January 2023.
The inflationary pressure that housing costs have been putting upward continues, as the 0.4% rise in home prices in October indicates, although it was at a time when renters’ rents were supposed to start cooling. Core is where the Fed focuses: The Fed will monitor and consider this statistic when making decisions for further policy.
