Reuters: September US PCE inflation ticks up, as expected

October 31, 2024

The Commerce Department’s personal consumption expenditures (PCE) price index, a key inflation measure for the Federal Reserve, rose 0.2% in September, aligning with expectations. Annually, PCE inflation increased 2.1%, its smallest rise since February 2021, reflecting progress toward the Fed’s 2% target. The core PCE, which excludes food and energy, rose 0.3% in September and 2.7% year over year, signaling potential inflationary persistence.

Michael Landsberg, Chief Investment Officer of Landsberg Bennett Private Wealth Management, noted that the recent core PCE rise could signal the start of an inflation rebound, expecting it to intensify into 2024 and 2025.

“We believe the Fed is still poised to cut interest rates in November by 25 basis points,” Landsberg stated, “but we believe the Fed will pause any rate cuts in December amid fears about a re-acceleration of inflation.”

Key Takeaways:

  1. PCE Inflation Reflects Slight Uptick: The PCE price index rose 0.2% in September, with an annual increase of 2.1%, the smallest since early 2021, while core PCE ticked up to 2.7%, indicating persistent inflationary pressures.
  2. Fed’s Rate Cut Outlook: Despite PCE progress toward the Fed’s target, Michael Landsberg anticipates that the Fed will cut rates by 25 basis points in November, though a pause is expected in December due to potential inflation re-acceleration.
  3. Concerns About Core Inflation: Core inflation, which remains above target, suggests that inflation risks may persist, leading some economists, like Peter Cardillo, to see a potential Fed pause to monitor inflationary impacts.
  4. Consumer Spending Patterns: While consumer spending appears robust, economist Brian Jacobsen highlights that it is increasingly concentrated in essential categories, indicating underlying economic pressures.

With the Fed’s 2% inflation goal in sight but inflationary pressures potentially lingering, the central bank may proceed cautiously in adjusting interest rates.

Michael Landsberg’s observations suggest that investors should prepare for ongoing inflation challenges as the Fed navigates this delicate economic landscape.

Learn more here: https://www.reuters.com/markets/us/september-us-pce-inflation-ticks-up-expected-2024-10-31/

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