The preferred US inflation measure of the Federal Reserve is reported to have dropped more than anticipated to 2.2% over the year leading to August, providing implications for future decisions on interest rate cuts. Compared to economists’ forecast of 2.3% and July’s reading of 2.5%, the personal consumption expenditure price index now lags behind. The Fed regulates a target 2% annually for the overall PCE index.
The Core PCE, excising erratic fuel and food costs, reflected the projection of the economists at 2.7%, a slight increase from July’s 2.6%. Upon the release of these statistics, interest-rate susceptible two-year treasury yields, which are inversely proportional to prices, slipped 0.03 percentage points to land at 3.59%.
On Wall Street, contracts pertaining to both the Nasdaq 100 and prestigious S&P 500 saw a 0.1% uptick before New York’s opening bell. The US dollar index saw little change.
Last week, The Fed reduced interest rates by half a percentage point, marking their inaugural cutback since COVID-19 hit, with an indication of more such deductions in the pipeline. As per Fed Funds futures providing coverage for the imminent meeting of the central bank in November, investors are presently under a fifty-fifty chance of predicting a quarter or half-point cut.