Key Fed inflation gauge shows PCE 'going sideways'
Published On Nov 27, 2024, 10:49 AM
The core Personal Consumption Expenditures (PCE) index, which is the Federal Reserve's preferred measure of inflation, showed flat price increases in October. It rose by 0.3% from the previous month, maintaining the same level as in September. Year-on-year, it increased by 2.8%, consistent with expectations. This indicates potential stagnation in progress toward the Fed's inflation target of 2%. Economists indicate that the Fed is likely to pause interest rate cuts unless there is a more substantial decrease in core PCE. Current market expectations point to a 67% chance of a rate cut at the Fed's December meeting, contingent on upcoming inflation data releases.
Stock Forecasts
XLF
Negative
Given the stalling in inflation progress, the likelihood of a rate cut in December remains, which could bolster certain sectors that thrive on lower interest rates. However, the lack of aggressive monetary easing could create a bearish sentiment in markets reliant on lower rates for growth. Financials and interest-rate sensitive sectors might face pressure if the Fed decides against immediate cuts.
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