The Federal Reserve’s preferred inflation gauge slowed to a two-and-a-half year low last month, according to data published Thursday, adding to bets that the central bank will begin cutting interest rates in the spring of next year.
The Bureau of Economic Analysis’ PCE Price Index showed core prices eased to 3.5% last month, matching Wall Street’s forecast and slowing from the 3.7% pace recorded in September. The reading was also the lowest since June of 2021.
On a monthly basis, core pressures were up 0.2%, a modestly slower pace compared to October’s 0.3% gain.
Markets often key on the BEA’s core PCE price index, which the Fed considers to be a more accurate representation of consumer price pressures as it blends changes in spending patterns.
The headline index, meanwhile, eased to an annual rate of 3.0%, matching the Street’s forecast, while the monthly advance was unchanged after a 0.4% advance in September.
The Bureau of Labor Statistics reported earlier this month that its headline consumer price index eased to 3.2% in October, while core prices, which strip out volatile food and energy costs, slowed to eased to a two-year low of 4.0%.
U.S. stocks held earlier gains following the data release with futures tied to the S&P 500 indicating a 12 point opening bell gain while those linked to the Dow showed a 235 point advance.
Benchmark 10-year Treasury note yields were little-changed at 4.290% while 2-year notes were pegged at 4.653%.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.32% higher from yesterday’s levels at 103.098
The CME Group’s FedWatch is now pricing in no chance that the Fed will lift the benchmark federal-funds rate by a quarter-point, to between 5.5% and 5.75%, when it meets next month in Washington. The odds of a hike in January were slashed to 4.1%.
Bets on a March rate cut, meanwhile, leaped to 47.9% , up from just 11% last month, with the odds of a reduction in May pegged at 47.4%.
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