The latest personal consumption expenditures (PCE) price index is out, and with it comes details of how inflation changed during the month of October 2024. That includes a 0.2% price increase compared to the month prior and a 2.3% price increase year-over-year. Both of these matched estimates for the October PCE report.
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Breaking this down, services prices were majorly responsible for inflation increasing month-over-month with a 0.4% rise, as well as a 0.1% jump in food prices. For comparison, goods were actually down 0.1% during the month with energy prices seeing a similar decline.
Looking at the year-over-year data, services prices rose by 3.9%, while food prices increased by 1%. Falling prices from October 2023 include goods at 1%, alongside a 5.9% decrease in energy prices.
What This Means for Interest Rate Cuts
The Federal Reserve wants to keep yearly inflation at 2%. Considering the 2.3% in this report, it’s clear that isn’t happening. This is what spurred the increase in interest rates over the last few years. Keeping those up has helped decrease inflation from its high of 7.2% in June 2022.
This might mean that an interest rate cut in December is less likely. Expectations were for a 25-point cut as the central bank slowly brings rates back down from a high of 5.25% to 5.5%. However, traders are still betting on a rate cut next month that could drop rates to between 4.25% and 4.5%.
What to Watch Next?
The Federal Reserve still has more data coming in before its next meeting on December 17. That includes the consumer price index (CPI) report and producer price index (PPI) report for November. These don’t have as much sway over the Fed’s decisions as the PCE report does, but they could still have an impact on its next meeting. These will come out on December 11 and December 12, respectively.
