The Fed’s preferred inflation gauge came in slower than Street forecasts Friday, helping pare bets on big rate hikes between now and the end of the year.
The Federal Reserve‘s preferred measure of U.S. inflation showed slowing price pressures over the month of September, suggesting a possible peak in broader consumer price increase and a pullback in the central bank’s rate hike path.
The September core PCE Price Index rose 5.1% from last year, down from the 4.9% pace recorded in August and slower than the consensus Street forecast of 5.2%. The core index was up 0.5% on the month, the Bureau of Economic Analysis reported, matching analysts’ forecasts.
The headline PCE index rose 0.3% on the month, but eased modestly to 6.2%) on the year following, extending the longest run of monthly declines since April of 2020.
Personal incomes rose by 0.4% while real personal spending rose by 0.3%, the BEA noted, topping the Street consensus forecast of a 0.1% advance.
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U.S. stocks pared earlier declines following the data release, with futures contacts tied to the Dow Jones Industrial Average indicating an 86 point opening bell gain and those tied to the S&P 500 priced for a modest 10 point dip.
Benchmark 10-year U.S. Treasury bond yields edged 1 basis point higher to 4.01% following the data release, while 2-year notes were pegged at 4.369%.
The CME Group’s FedWatch tool is showing an 83% chance of a 75 basis point rate hike from the Fed next week in Washington, down from around 97.5% earlier this month, with bets on a smaller 50 basis point rate hike in December rising to around 48%.
