The Fed’s Preferred Inflation Gauge Cooled in August

Published On Sep 27, 2024, 8:43 AM

The article discusses recent data indicating that inflation in the U.S. has been slowing down, as seen in the Personal Consumption Expenditures (PCE) index rising only 2.2% in August compared to 2.5% in July. This trend has allowed the Federal Reserve to initiate interest rate cuts from a high of 5.3%, with more cuts anticipated if inflation continues to decline. While consumer spending grew more slowly in August, the overall economic activity is not collapsing, suggesting that policymakers are aiming for a 'soft landing' where inflation is controlled without causing significant unemployment or economic downturn.

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Stock Forecasts

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Positive

The Federal Reserve's interest rate cuts and ongoing easing of inflation can create more favorable conditions for economic growth and could boost sectors tied to consumer spending and mortgages. Investors may look to gain from sectors that typically benefit from lower interest rates, such as technology and consumer discretionary.

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Negative

Conversely, the slower growth in consumer spending and softening income data may signal caution in the broader economy, potentially impacting sectors dependent on strong consumer behavior. Industries facing challenges from these indicators could include consumer staples and utilities, which might see a shift in investment.

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