The Fed's main inflation measure will be released Wednesday. Here's what to expect
If anyone at the Federal Reserve is looking for evidence arguing against another interest rate hike, they're unlikely to get it in data due Wednesday that is expected to show ongoing price pressures โฆ
If anyone at the Federal Reserve is looking for evidence arguing against another interest rate hike, they're unlikely to get it in data due Wednesday that is expected to show ongoing price pressures and consumers who nevertheless continue to spend.
The personal consumption expenditures price index, the primary inflation gauge for central bank policymakers, is expected to show increases of 0.3% at both the all-items and core levels, the latter of which excludes food and energy costs, according to the Dow Jones consensus.
On an annual basis, the price levels are expected to show increases of 3.7% and 3.3%, respectively, unchanged from July and still well above the Fed's 2% target.
In other words, there's little indication that inflation is going to abate anytime soon.
"The Fed is going to look at this and say, 'Hey, you know, the core is not moving, and I don't have any expectations or anything to believe that it's going to start going back down in any sort of convincing way,'" said Dan North, senior economist at Allianz Trade. "It's still way above target ... So I think it's really embedded in there to the extent that the Fed is not going to be able to ignore it or explain it away."
Fed officials at their September meeting approved a quarter percentage point rate increase and penciled in the likelihood of another by the end of the year. All but two of the 18 Federal Open Market Committee officials who provided forecasts indicated they expect at least one more move in 2026 as they raised their consensus PCE inflation outlook.
Fed Chairman Kevin Warsh said at his news conference earlier this month that hiring data along with business investment and private sector earnings show the economy in good shape.
"I would be hard pressed to describe broad financial conditions as restrictive," Warsh said. Financial conditions are an important input for how the Fed calibrates rate policy.
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