U.S. PCE Inflation Rises 0.5% in September as Fed Decision Looms
Key Facts
The U.S. Personal Consumption Expenditures price index rose 0.5% in September from the previous month, following a 0.3% increase in August, according to data from the U.S. Bureau of Economic Analysis. The monthly reading matched economists’ expectations, Reuters reported, citing Marketscreener. In its statement on October 28, the Federal Reserve held its target interest-rate range between 3.75% and 4%, in a 10-to-2 vote. Lisa Cook and Beth Hammack voted to raise the range by a quarter percentage point. The Fed said inflation remained elevated and that accumulating more information would help the committee determine the policy needed to ensure inflation returned to its 2% goal in a timely manner.
The Bureau of Economic Analysis said the increase in nominal consumer spending in September reflected a $35.1 billion rise in spending on goods and a $78.1 billion increase in spending on services. Total current-dollar consumer spending rose $113.1 billion, according to the same release. By contrast, real consumer spending was unchanged during the month, after rising 0.5% in August. Real disposable personal income fell 0.3% in September, after no change in the previous month. The figures highlight a divergence between continued growth in spending at current prices and a halt in growth after adjusting for price changes.
In the broader growth picture, U.S. real gross domestic product grew at an annual rate of 3.4% in the third quarter, compared with 2.2% growth in the second quarter, according to the Bureau of Economic Analysis. Increases in investment, consumer spending and government spending contributed to third-quarter growth. The reading puts continued expansion in economic activity alongside unchanged real consumer spending in September. In its October statement, the Fed described economic activity as expanding at a solid pace, while keeping its inflation target at 2%. The hold comes amid disagreement within the committee over the appropriate next step, as reflected in the two members’ votes for a rate increase.
In markets, futures on October 28 priced in an 85% probability of a quarter-point rate increase at the December meeting, up from 78.3% the previous day, Reuters reported, citing Investing.com. These are market-implied estimates, not a decision made in advance by the Fed. In the gold market, spot prices fell 1.4% on October 29, and Reuters said inflation data strengthened expectations of a rate increase. The news agency quoted David Meger as saying the PCE report had not dispelled market concerns about the December meeting. Gold movements and rate pricing show how markets are responding to price data and monetary-policy signals.
The decline in the cryptocurrency market coincided with a security incident at Binance, with no evidence linking Ether’s drop to inflation data. The Associated Press said Bitcoin fell 3.2% on the evening of October 29 to below $79,000 in its coverage of the incident. Binance estimated the incident’s total impact at about $6.3 billion and said it had worked with blockchain-industry partners to freeze about $3 billion in affected assets on-chain. The exchange also pledged to cover losses, according to its statement. Daily Ethereum data showed a close of $2,253.13 on October 29, followed by $2,221 on October 30; both closes were above $2,200.
The Federal Reserve is scheduled to hold its next meeting on December 8 and 9, according to the Federal Open Market Committee calendar. Before then, the Bureau of Economic Analysis will release October personal income and spending data on November 25 at 8:30 a.m. Eastern time. The reading will follow September data showing a 0.5% monthly increase in the PCE index, alongside no change in real spending during the month. The December decision remains open as the committee assesses the accumulated information, as stated in its release. The upcoming October data will be among the indicators available before the December meeting.