Chicago Fed President Austan Goolsby spoke candidly about the impact of the Federal Reserve's actions on the “Craman Countdown.''
Inflation measures closely monitored by Fed policymakers rose in October but remain close to the Fed's inflation target.
The Commerce Department said Wednesday that the personal consumption expenditure (PCE) index rose 0.2% in October, up 2.3% from the same month last year. These numbers were in line with expectations of economists surveyed by LSEG.
Core PCE, which excludes volatile food and energy prices, rose 0.3% from the previous month and 2.8% from a year earlier, in line with expectations.
The US Federal Reserve is focused on the headline PCE figure as it seeks to return inflation to 2%, but policymakers say the core measure is a better indicator of inflation. It is regarded as Headline PCE rose from 2.1% in September and was on par with August's 2.3%, suggesting inflation is picking up slightly, while core PCE was little changed from the previous month.
Fed's Goolby advocates lower interest rates
Prices rose at a pace in October that was in line with economists' expectations, according to the Fed's preferred inflation measure. (Spencer Pratt/Getty Images/Getty Images)
Key PCE data showed that prices of goods fell by 1% year-on-year during the period, while prices of services rose by 3.9%. Compared to October 2023, food prices increased by 1%, while energy prices decreased by 5.9%.
Wages and salaries rose 0.5% month-on-month in October, a slightly higher growth rate than September's 0.4%. This followed monthly wage increases of 0.5% in August and 0.4% in July, and was significantly higher than the previous three months when wages were close to zero.
Fed Chairman Jerome Powell says central bank is in no hurry to reach 'neutral interest rate'
The personal savings rate as a percentage of disposable income was 4.4% in October, up slightly from 4.1% last month, but down from around 5% this spring.
The data was released as the Federal Reserve prepares to meet next month to discuss its next steps on interest rates.
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Federal Reserve Chairman Jerome Powell recently indicated that the Fed is in no hurry to lower interest rates to a “neutral” level. (Robert Schmidt/AFP via Getty Images/Getty Images)
PCE's announcement raised market expectations that the Fed would cut interest rates by 25 basis points next month, with CME saying Tuesday that traders saw a 69.7% chance of a similar rate cut at its December meeting. This rose from 59.4%. FedWatch Tool.
“The problem for the Fed is that core services inflation, excluding housing and energy, is at an all-time high.” [month over month] “Inflation momentum toward the Fed's 2% target has lost steam recently, but not enough to prevent the Fed from cutting rates in December,” said Ryan Sweet, chief U.S. economist at Oxford Economics. We think so.” ”
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The Fed is approaching its rate-cutting campaign with a view to its dual mandate of ensuring price stability and maximum employment, and despite the October rally and signs of strength in the labor market, inflation remains at 2. % target,
“While economic conditions are supported by a resilient labor market and strong consumer spending, the Fed continues to predict that low-wage workers will continue to suffer from rising interest rates and small businesses will continue to suffer from rising prices,” said Chief Global's Quincy Crosby. “I'm concerned about how they're dealing with bank loans.” Strategist at LPL Financial. “The last mile towards price stability remains hampered by 'sticky' inflation and bumps in the road.”
