The US economy is showing signs of cooling inflation, as the personal consumption expenditures (PCE) price index rose by a mere 0.1% in November, falling short of expectations. According to a recent report by Reuters, this represents a softer inflation trajectory compared to October’s 0.2% increase, offering some solace to markets confronting the Federal Reserve’s current monetary stance.

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Data from IndexBox reveals that, in the year through November, the PCE price index advanced by 2.4%, up from the 2.3% rise recorded in October. Excluding volatile food and energy categories, the core PCE index also saw a 0.1% rise, following an unrevised 0.3% gain the previous month. Despite these figures, annual core inflation remained consistent at a 2.8% increase.

The stock markets showed cautious optimism as the S&P 500 managed to reduce its losses to -0.51%. Meanwhile, U.S. Treasury yields responded by falling; the 10-year yield dropped to 4.506%, and the two-year yield decreased to 4.259%. The dollar index experienced a 0.42% decline.

Market analysts offered mixed reactions to the data. Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, noted, “The market woke up in a terrible mood – an unexpected government shutdown and a more-hawkish-than-expected Fed are to blame – but this morning’s inflation data came in lower than expected and took some of the edge off.” Brian Jacobsen, Chief Economist at Annex Wealth Management, commented on the incongruity between the data and the Fed’s hawkish stance, indicating that “Powell must be getting tired of the data undermining things he says.”

Despite the cooler-than-expected macroeconomic indicators, Peter Cardillo, Chief Market Economist at Spartan Capital Securities, believes it may not significantly alter the Fed’s course, but insists that it “should relieve some of the pressures in the bond market.”

The slower-than-expected growth in spending has raised questions about consumer behavior, but many experts maintain that the underlying economic fundamentals remain unchanged. As markets digest these findings, all eyes remain on future Fed movements as they navigate this complex landscape.

Source: IndexBox Market Intelligence Platform  

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