NEW YORK (Reuters) – Annual U.S. inflation slowed further below 3% in November and underlying price pressures continued to abate, which could cement financial market expectations for an interest rate cut next March.
The personal consumption expenditures (PCE) price index, fell 0.1% last month after being unchanged in October, the Commerce Department reported on Friday. Year on year, the PCE index increased 2.6% after rising 2.9% in October. October was the first since March 2021 that the annual PCE price index was below 3%.
Excluding the volatile food and energy components, the PCE price index rose 0.1% in November, matching December’s gain. The so-called core PCE price index advanced 3.2% year-on-year in November, the smallest rise since April 2021, after increasing 3.4% in October.
MARKET REACTION:
STOCKS: U.S. stock futures added to a small gain and were up 0.11% BONDS: U.S. Treasury 10-year yield rose to 3.88% after the dataFOREX: The dollar index briefly cut a small loss and was last down 0.16%
COMMENTS:
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“The inflation news is good, it continues to point in the right direction and if the numbers continue along this path there’s a good possibility that the Fed will cut rates sooner than expected.”
“Personal income was strong, spending was on the weak side.”
“And don’t forget (new orders for) durable goods were up 5.4%.”
“The economy is showing weakness, and it will likely result in earlier than expected rate cuts by the Fed.”
“Today we’re going to have light volume so we might see larger than usual gyrations. But I think momentum is still on the positive side.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN“Higher income, lower spending, and lower inflation. What’s really not to like? Core inflation has been running right at the Fed’s target for the past three months, so the Powell Pivot may have seemed abrupt, but it’s justified. The Fed doesn’t have to move its inflation target to declare victory, it just has to let things play out naturally.”
(Compiled by the Global Finance & Markets Breaking News team)
