Progress in taming inflation slowed in October, but futures market investors think the latest numbers up the odds of another Federal Reserve rate cut next month.
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Progress in taming inflation slowed in October, but not to the extent that investors think a December Fed rate cut is off the table.
The Federal Reserve’s preferred measure of inflation showed annual growth in the price of goods and services moved away from the central bank’s 2 percent target in October.
At 2.3 percent, annual growth in the Personal Consumption Expenditures (PCE) price index was up from 2.1 percent in October, the Bureau of Economic Analysis reported Wednesday.
But bond market investors took the news in stride, as month-over-month inflation readings stayed in line with forecasts.
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Yields on 10-year Treasury notes, a barometer for mortgage rates, dropped 6 basis points Wednesday, and futures markets tracked by the CME FedWatch tool show investors think the odds of a Dec. 18 rate cut have improved to 66 percent, up from 59 percent on Tuesday.
Uptick in annual inflation
Annual Core PCE, which excludes the cost of food and energy, rose to 2.8 percent in October, up from 2.7 percent in September and the highest reading since April.
The 0.2 percent and 0.3 percent month-over-month increases in the PCE and core PCE indexes were in line with forecasters’ expectations.
Samuel Tombs
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