The Federal Reserve’s preferred measure of inflation edged higher in September, data indicated Thursday, providing further evidence that a solid job market and an outperforming could be adding to renewed price pressures into the final months of the year.
The Bureau of Economic Analysis’ PCE Price Index report showed that core prices rose at an annual rate of 2.7% last month, matching August’s reading and coming in just ahead of Wall Street’s 2.6% forecast.
Core pressures, which strip away volatile food and energy prices, were up 0.3% on the month, compared to August’s 0.2% gain and Wall Street’s consensus estimate of 0.3%.
Markets focus on the core PCE inflation reading, which the Fed considers a more accurate representation of overall price pressures, as it incorporates changes in consumer spending patterns.
The BEA’s headline PCE inflation index eased to an annual rate of 2.1%, matching Wall Street’s and down from the 2.2% pace recorded in August. Prices were up 0.2% on the month, the BEA said, following a 0.1% reading in August.
The Federal Reserve will make its next-to-last policy decision on November 6, with investors now concerned that renewed inflation pressures could slow the pace of rate cuts into 2025.
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The BEA also noted that personal incomes for September rose 0.3%, matching the revised 0.3% pace in August, reflecting some firmness in the labor market. Spending accelerated 0.5% compared with the 0.2% gain over the previous month.
U.S. stock futures nudged lower following the inflation data release, with the S&P 500 indicating a 33 point opening bell decline and those linked to the Nasdaq priced for a 130 point pullback.
Benchmark 10-year note yields were little-changed at 4.291% following the data release, while 2-year notes were pegged at 4.174%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.06% lower at 103.928.
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Earlier this month, the Commerce Department’s CPI inflation report showed headline pressures falling to 2.4% in September, the lowest since February 2021, but noted that core inflation quickened for the first time in more than a year and a half to 3.3%.
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Since then, weekly jobless claims data have shown notable resilience, while ADP’s National Employment report indicated a firmer-than-expected 233,000 new hires in the private sector.
That suggests a firmer-than-expected labor market could support an already outperforming economy into the final months of the year, following data from the Commerce Department Wednesday that pegged third quarter growth at 2.8%.
The CME Group’s FedWatch, meanwhile, suggests a 96.1% chance of a quarter point rate cut from the Federal Reserve next week in Washington, with the odds of a follow-on move in December pegged at 70%.
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