Inflation was more manageable than expected in November, according to the Federal Reserve’s favored measure of price changes, as sticky inflation douses investors and borrowers’ hopes of much lower interest rates in 2025.
Federal Reserve Chairman Jerome Powell at a Wednesday press conference.
The core personal consumption expenditures index rose 2.8% year-over-year, according to the metric released Friday morning by the Commerce Department, matching October’s reading.
The reading of core PCE, which tracks how much Americans spent on goods and services outside of more price-volatile food and energy categories, is better than median economist forecasts of 2.9%, according to Dow Jones data.
Headline PCE inflation came in at 2.4%, also lower than estimates of 2.5%, but still up from October’s 2.3%.
Investors reacted positively to the release, as yields for 2-year and 10-year Treasury government bonds dropped more than five basis points apiece — lower bond yields signify more valuable bonds — and stocks trimmed earlier losses, as S&P 500 futures moved from a 0.8% loss to a 0.4% one.
Friday’s inflation report comes as Wall Street grapples with an all-too-familiar story: A stock market selloff traced to monetary policy pessimism from lingering inflation concerns. The Federal Reserve’s quarterly summary of economic projections released Wednesday revealed the median central banker forecast calls for 2.5% core PCE inflation by the end of next year, up from the 2.2% projected in September and still noticeably above the Fed’s 2% goal. That more pessimistic inflation forecast, which may be tied to the inflationary policies supported by President-elect Donald Trump, came as the Fed forecast for end-of-2025 interest rates rose from 3.4% to 3.9%, meaning the stimulatory rate cuts long yearned for by financial markets may be sparser than expected. That sentiment shift caused major stock market losses Wednesday, when the S&P 500 tanked 3%. The selloff continued in premarket trading, as S&P futures had declined nearly 1% prior to the PCE release as the benchmark index heads to its worst week since August.
Trump Isn’t President Yet. He’s Already Spooking the Fed. (Wall Street Journal)
Fed Announces Another 25 Basis Point Interest Rate Cut—But Signals 2025 Rate Cuts Likely Sparse (Forbes)