Cooler August Inflation Reading Eases October Rate-Hike Bets
The Fed’s preferred gauge stayed above its target, but markets sharply reduced expectations for another increase.
August’s personal consumption expenditures index rose 3.4% from a year earlier, matching July and slowing from its 3.8% peak in May. The result came in below the 3.7% forecast, suggesting inflation may be less persistent than analysts expected. A separate measure that leaves out food and energy increased 3%, also below projections and unchanged from recent months.
Markets responded by marking down the odds of a quarter-point Federal Reserve increase to a 4%-to-4.25% range. Futures put that chance at 37%, down from 51% the previous day and 70% a week earlier. Lower-rate expectations can affect borrowing costs, including mortgages and credit cards, while also supporting stocks. The S&P 500 rose 0.5% in late-morning trading, and the Nasdaq gained 0.9% after the report.
The inflation reading is only one input for the Fed’s next meeting, scheduled for Oct. 27-28. The September employment report arrives Friday, followed later in October by the Consumer Price Index. The next PCE release will come after the Fed gathers, so those upcoming reports could shape expectations about what happens next.
- aol.com