Brian Levitt, global market strategist at Invesco, said at Barron's Roundtable that inflation has returned to its comfort zone.
Inflation measures closely watched by Fed policymakers continued to slow in August as the pace of price increases trended closer to the Fed's target.
The Personal Consumption Expenditures (PCE) price index released by the Department of Commerce on Friday rose 0.1% from the previous month and 2.2% from a year earlier. The full-year figure was lower than expected by economists surveyed by LSEG.
Core PCE, which excludes volatile food and energy prices, rose 0.1% in the month and 2.7% year-on-year, in line with expectations and little changed from the previous month.
While the Fed is focusing on the headline PCE numbers as it tries to bring inflation back to 2%, policymakers view core data as a better indicator of inflation. Both core and headline numbers suggest that inflation continues to cool.
Consumer confidence falls, marking steepest drop in three years
According to the personal consumption expenditure (PCE) price index, prices rose 2.2% year-on-year, lower than expected. (Photo by Mostafa Bassim/Anadolu, Getty Image/Getty Images)
“It's been pretty quiet on the inflation front,” said Chris Larkin, managing director of trading and investments at Morgan Stanley's E*Trade. “Add today's PCE price index to the list of economic indicators that have hit the sweet spot. Inflation remains low and economic growth may be slowing, but there are no signs of us falling off a cliff. ”
According to key PCE data, prices of goods fell by 0.2% on a monthly basis in August, while prices of services rose by 0.2%. Food prices rose 0.1% from the previous month, and energy prices fell 0.8%.
Compared to August last year, the prices of goods fell by 0.9%, but the prices of services rose by 3.7%. Food prices rose 1.1% year-on-year, and energy prices fell 5%.
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