At a time when most Fed officials expect interest rates to fall in the future, a key report on Wednesday is expected to show inflation moving further away from target. The Commerce Department will release October’s Personal Consumption Expenditures Price Index, the Federal Reserve’s main measure of how fast prices are rising. Economists surveyed by Dow Jones expect the overall all-item indicator to show a monthly gain of 0.2%, while the core indicator, which excludes food and energy, is expected to rise 0.3%. While both readings are the same as September, their respective annual growth rates are expected to rise to 2.3% and 2.8% respectively. While this is an improvement from the peak in mid-2022, trends suggest the Fed has not yet reached its 2% target. What’s more, markets are beginning to anticipate that Donald Trump’s presidential election victory and his pro-growth agenda, as well as plans to impose steep tariffs on global imports, may make the Fed’s task more difficult. “Recent data suggest that inflation progress has slowed,” Deutsche Bank senior U.S. economist Brett Ryan said in a note. “This policy mix will reinforce those signals.” In fact, Ryan It is predicted that core personal consumption expenditures inflation will “stagnate” at around 2.5% or higher until 2026, although Fed officials have expressed their intention to continue lowering interest rates. Markets have become more skeptical of the Fed’s ability to ease policy recently. In Tuesday trading, the market implied a slightly higher than 50% chance of a rate cut in December, with the federal funds rate expected to be only 0.5% between now and the end of 2025, as measured by CME Group’s FedWatch. Futures pricing fell 75 basis points. “Recent wage data shows gains remain elevated and suggests core inflation is unlikely to cool near the Fed’s 2% target,” BlackRock experts said in a weekly market report on Monday. “With inflationary pressures likely to persist, It is becoming increasingly clear that the market has priced in the possibility of a rate cut by the Fed and is getting closer to our view.”
The Fed’s favorite inflation gauge may show some bad news for prices | Real Time Headlines
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