Welcome to Extreme Investor Network, where we provide you with unique insights and analysis on the latest economic trends and news. Today, we delve into the recent report from the Commerce Department regarding inflation and its impact on the Federal Reserve’s future interest rate decisions.
In August, inflation in the U.S. moved closer to the Federal Reserve’s target, with the personal consumption expenditures price index rising 0.1%. This brought the 12-month inflation rate to 2.2%, down from 2.5% in July and the lowest since February 2021. Economists had been expecting a slight increase in all-items PCE, but the numbers came in slightly lower than anticipated.
Interestingly, core PCE, which excludes food and energy, also rose 0.1% in August and was up 2.7% from a year ago. This metric is often favored by Fed officials as a better measure of long-run trends. Despite the positive inflation numbers, personal spending and income figures came in lighter than expected.
The report had an impact on the stock market futures, which were positive following the release, while Treasury yields trended lower. This data comes shortly after the Fed’s decision to lower its benchmark overnight borrowing rate by half a percentage point.
While inflation remains in check, the focus for the Fed has shifted towards supporting the labor market, which has shown signs of softening. Policymakers hinted at further rate cuts in the coming year, with markets expecting a more aggressive approach.
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