The September PCE report was out this morning. PCE price index went up 0.4% and core PCE went up 0.3% MoM. Core PCE inflation is the 2% target the Fed is trying to optimize for. After the on-target 0.1% growth in August, September core PCE was up 0.3%, which is too high to the Fed’s standard. It’s also worth noting that after adjusting for inflation, the personal consumption was up 0.4% while the disposable income was down -0.1% in September. In other words, people are spending more and saving less and it has been like this for the past three months. It’s unclear how long this could continue but I imagine the consumers are feeling more squeezed than a few quarters ago. The FOMC is going to determine if they are going to raise interest rates next Wednesday. The current consensus is that they will keep the rate the same but this PCE print probably dashes the hope for people who want the Fed to cut rates ASAP.
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