(Reuters) – The personal consumption expenditures (PCE) price index rose 0.1% in August after an unrevised 0.2% gain in July, the Commerce Department said on Friday. Economists had forecast PCE inflation to advance 0.1%. In the 12 months to August, the PCE price index rose 2.2% after rising 2.5% in July.
The core PCE price index excluding volatile food and energy components rose 0.1% after an unrevised 0.2% rise in July. In the 12 months to August, core inflation advanced 2.7% after rising 2.6% in July. The US Federal Reserve monitors PCE price action for its 2% inflation target.
Market Reaction:
Equities: US stock futures pointed to a firmer Wall Street open of 0.16%
Bonds: The 10-year U.S. Treasury yield fell to 3.762% and the two-year yield fell to 3.584%.
Forex: The dollar index fell 0.4%
Comments:
Quincy Crosby, Chief Global Strategist, LPL Fund, Charlotte, NC (email reference)
“The August PCE report supports the central bank’s decision to go bigger on September 18, although the key annual rate of 2.7% suggests another round of 50 basis points should be carefully scrutinized unless it suggests labor market weakness.
“While the Fed can’t declare a complete victory on inflation, today’s report — with a 2.2% year-over-year headline rate — underscores that overall inflation is moving decisively in the right direction.
“Stock futures across the board are appreciating the numbers as the ten-year Treasury yield inches lower.”
Jamie Cox, Managing Partner, Harris Financial Group, Richmond, VA (email reference)
“Inflation is no longer the story in the Fed’s PCE data. Now it’s about spending and keeping the economy strong. If you guessed the Fed was going to hit .50 in September, you didn’t. These data suggest another one. Maybe 50 in November.”
Brian Jacobson, Chief Economist, Annex Wealth Management, Menomonie Falls, Wisconsin
“Powell can breathe a little sigh of relief. Personal income and spending data so far confirm that conclusion after pushing for a 50 bps cut instead of the usual 25 bps. Core inflation has been slightly lower than expected, incomes and personal interest income have fallen for two months in a row and interest rates will not be cut and Economic waves that reduce real disposable income some may cause some gas for the wind.”
Peter Cardillo, Chief Market Economist, Spartan Capital Securities, New York
“Fundamentally, these numbers confirm two things. One is that inflation continues to move lower and if you look at the year-on-year headline of 2.2%, we are not far from the central bank’s 2% target.
“Personal income and spending were cooler than expected, another sign that the economy is slowing.”
“This is good news for the markets in one respect, and it basically indicates that the Fed is likely to continue to cut, perhaps by another 50 basis points before the end of the year.”
“The reason (the muted reactions of index futures) is that it’s been a very strong week, of course, because you know personal income and spending are weakening as the economy continues to hold back traders.”
(Compiled by Global Finance & Markets Breaking News Team)
2024-09-27 18:30:46