The U.S. Department of Commerce said on the 5th that the personal consumption expenditures (PCE) price index for September rose 2.8% from a year earlier.
This is the highest increase in a year and six months since March 2024 (2.9%). From the prior month, it rose 0.3%.
Excluding energy and food, the core PCE price index rose 2.8% from a year earlier, slowing from 2.9% in August. The month-over-month increase was 0.2%.
The PCE price index increases released that day largely matched expert expectations. While the year-over-year increase in the headline index came in below the 2.9% forecast compiled by Dow Jones, both the month-over-month increase and the core index matched forecasts. As a result, a rate cut in December was expected to become a foregone conclusion.
The September PCE should have been released in October but came out late due to the government shutdown. The PCE price index is an inflation gauge that measures the prices paid by U.S. residents when purchasing goods and services.
The Federal Reserve (Fed), the Central Bank, uses the PCE price index as its benchmark instead of the relatively better-known consumer price index (CPI) when judging whether it is meeting its "2% inflation" currency policy goal.
Nominal personal consumption expenditures for September, released the same day, rose 0.3% from the prior month, below the market forecast of 0.4%. Nominal personal income rose 0.4% from the prior month, beating the 0.3% forecast.
Although the inflation rate that the Fed focuses on did rise, it largely stayed within expert expectations, and thus is not expected to significantly alter expectations for a Fed rate cut in December.
According to CME FedWatch, as of the morning, the interest-rate futures market was pricing in an 87% chance that the Federal Open Market Committee (FOMC), the Fed's rate-setting body, will lower the benchmark rate by 0.25 percentage points to 3.75–4.00% on the 10th.