The US economy showed signs of easing inflation in November, with the personal consumption expenditures (PCE) price index rising by just 0.1%, according to a Reuters report. This softer-than-expected increase follows October’s 0.2% gain, providing some relief to markets navigating the Federal Reserve’s current monetary policies.
Data from IndexBox highlighted a 2.4% year-on-year increase in the PCE price index through November, a slight uptick from October’s 2.3% rise. When excluding volatile food and energy costs, the core PCE index also rose by 0.1%, compared to an unrevised 0.3% gain the previous month. Despite the month-on-month deceleration, annual core inflation held steady at 2.8%.
Market reactions reflected cautious optimism. The S&P 500 narrowed its losses to -0.51%, U.S. Treasury yields declined—with the 10-year yield falling to 4.506% and the two-year yield to 4.259%—and the dollar index dropped by 0.42%.
Opinions from market analysts were mixed. Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, remarked, “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, noted the disconnect between the inflation data and the Federal Reserve’s stance, stating, “Powell must be getting tired of the data undermining things he says.”
Peter Cardillo, Chief Market Economist at Spartan Capital Securities, suggested the softer inflation data might not significantly influence the Fed’s policy direction but could ease some pressures in the bond market.
The slower-than-anticipated rise in consumer spending has prompted discussions about shifts in consumer behavior. However, experts maintain that the economy’s fundamental outlook remains stable. As markets process the data, attention remains fixed on how the Federal Reserve will navigate this evolving economic landscape.
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