US September PCE Inflation Rises 2.1% 'In Line with Expectations'... Gradual Interest Rate Cuts Weighed

Core PCE up 2.7% YoY... Slightly Exceeds Expectations
94.1% Chance of 0.25%P Cut in November

The US Personal Consumption Expenditures (PCE) price index rose by just over 2% last month, in line with market expectations. As inflation approaches the Federal Reserve's (Fed) target of 2%, the market anticipates that the monetary authority will continue its gradual interest rate cut policy.

[Image source= Xinhua News Agency]

On the 31st (local time), the US Department of Commerce announced that the September PCE price index increased by 2.1% year-on-year. This is a 0.2 percentage point decline from August's figure (2.3%) and matches the market forecast (2.1%).

The PCE price index rose by 0.2% month-on-month. Although this increase was larger than August's figure (0.1%), it was in line with market expectations (0.2%).

The core PCE price index, which excludes volatile energy and food prices to show the underlying inflation trend, rose 2.7% year-on-year, slightly exceeding the forecast (2.6%). Month-on-month, it increased by 0.3%, meeting the forecast (0.3%). In August, the core PCE price index rose 2.7% year-on-year and 0.2% month-on-month.

Service prices excluding housing and energy rose 0.3% month-on-month. Goods prices excluding food and energy increased by 0.1%, while food prices rose 0.4%, marking the largest increase since the beginning of the year.

The market expects the Fed to maintain its gradual interest rate cut stance. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on the day reflected a 94.1% probability that the Fed will cut rates by 0.25 percentage points at the November Federal Open Market Committee (FOMC) meeting. The probability of a rate hold was 5.9%.

Jamie Cox, Managing Director of Harris Financial Group, analyzed, "Investors want to see a scenario where growth rises and inflation falls. As long as disinflation continues in this cycle, the Fed does not need to fear a steadily growing economy when cutting rates."

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