On Friday, Oct 28, the Fed got a reading on its target inflation number when the Bureau of Economic Analysis released the Personal Consumption Expenditures (PCE) Index for September. While this reading is over a month old, it is still the most current index the FOMC will have access to in its meeting on November 1–2.
Unlike the CPI, which came in at 8.2%, the PCE held steady at 6.2% on a year-over-year basis. The core PCE did increase from 4.9% to 5.1%. There was considerable movement of prices within the index. For example, durable goods increased from 5.3% to 5.7%, but non-durables decreased from 10.6% to 9.5%, reflecting declines in gasoline and other energy-related products. Prices increased for services from 5.0% to 5.3%, driven by rising housing and transportation services costs. High food prices, which are widely cited in the news media, actually decreased slightly, from 12.3% to 11.9%. But on a year-over-year basis, energy-related goods and services and food are the major sources of inflation at this time.
The Fed will likely conclude that an unchanged PCE that is significantly above its target, combined with continued strength in the labor market, will justify another 75-basis-point increase in its target range for the federal funds rate. New claims for unemployment insurance released on Thursday, Oct 17, for the week of October 22 increased 3,000 from the previous week, to 217,000, and the four-week moving average increased 6,750 to 219,000. These numbers are low and at pre-pandemic levels, indicating a strong labor market and showing little sign of a recession.
Robert Eisenbeis, Ph.D.
Vice Chairman & Chief Monetary Economist
Email | Bio
Links to other websites or electronic media controlled or offered by Third-Parties (non-affiliates of Cumberland Advisors) are provided only as a reference and courtesy to our users. Cumberland Advisors has no control over such websites, does not recommend or endorse any opinions, ideas, products, information, or content of such sites, and makes no warranties as to the accuracy, completeness, reliability or suitability of their content. Cumberland Advisors hereby disclaims liability for any information, materials, products or services posted or offered at any of the Third-Party websites. The Third-Party may have a privacy and/or security policy different from that of Cumberland Advisors. Therefore, please refer to the specific privacy and security policies of the Third-Party when accessing their websites.
Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.
