A key measure of inflation showed further signs of slowing down in October, which is positive news for the Federal Reserve as they assess the need for additional measures to control rapid price increases.
The Personal Consumption Expenditures (PCE) inflation measure, which the Fed uses to target an average 2 percent inflation over time, rose by 3 percent in the year through October. This was a decrease from the previous month’s 3.4 percent and aligned with economists’ predictions. Month-on-month, prices remained unchanged.
When volatile food and fuel prices are excluded to provide a clearer view of underlying price pressures, inflation increased by 3.5 percent over the year, down from 3.7 percent in the previous period.
Another positive sign for Fed officials is that consumer spending has moderated, with a 0.2 percent increase in personal consumption from September, indicating a slight slowdown from the previous month.
The upcoming December meeting will be crucial for the Fed, as they are expected to release new economic projections that could provide insight into their future policy plans. Despite the anticipation of leaving borrowing costs unchanged, policymakers are closely monitoring inflation and consumer spending trends.
The Fed has already raised interest rates to their highest level in over two decades, currently ranging between 5.25 and 5.5 percent. While some officials have suggested a pause in policy adjustments to assess the impact, the economy’s resilience to higher borrowing costs has kept others cautious.
Christopher Waller, a Fed governor, expressed encouragement towards the signs of moderating economic activity in the fourth quarter, while acknowledging that it is too early to determine if this slowdown in inflation will be sustained.
Overall, the decrease in the PCE inflation measure for October provides the Fed with important data to consider as they evaluate their strategy for managing inflation and economic growth.
