U.S. Core Inflation Rises to 3.1% as Rate-Hike Bets Weigh on Ethereum
Key Facts
U.S. core inflation rose to 3.1% year over year in September, from 3.0% in August, while the Federal Reserve left interest rates unchanged at its meeting on October 28. In a report published by Reuters on October 29, the probability of a rate hike in December was estimated at about 84.6%, according to CME FedWatch, a market pricing measure that does not represent a decision by the central bank. The inflation data came as Ethereum fell sharply on October 29, recording $2,253.22, down 4.51% on the day, according to Investing.com data. But the recorded daily price does not establish that the currency closed below $2,200, or identify inflation as the cause of the decline. On October 30, the listed low was $2,201.14, while the price field stood at $2,214.61, above that level.
Data from the U.S. Bureau of Economic Analysis showed the headline personal consumption expenditures price index rose 0.5% in September from the previous month, compared with a 0.3% increase in August. Year over year, headline inflation climbed to 3.6% from 3.4%, according to the bureau. The core index, which excludes food and energy, rose 0.3% month over month, while its annual increase was 3.1% after 3.0% in August, Reuters reported. The comparison shows annual price pressures accelerated on both measures, while the core index's monthly increase remained below that of the headline index. These figures cover September's reading, published alongside personal income and spending data.
The reading came as the Fed had held, on October 28, its federal funds target range at 3.75% to 4%, by a 10-to-2 vote. The bank said in its statement that “inflation remains elevated,” pointing to its longer-run goal of 2%. Lisa Cook and Beth Hammack voted to raise the range by a quarter of a percentage point, dissenting from the decision to hold. The split signals support within the committee for a tighter policy, but does not change the official decision adopted by the majority. The roughly 84.6% probability of a December hike cited by Reuters reflects market pricing after the September data were released.
Consumer activity data showed nominal spending continued to grow, but at a slower pace: it rose 0.5% in September after a 0.9% increase in August, Reuters reported. Adjusted for inflation, real spending was unchanged during the month, despite growing at a 3.8% rate in the third quarter. In the same report, the U.S. economy grew at an annualized rate of 3.4% in the third quarter. These indicators place the inflation reading in the context of an economy that continued to grow, while real spending posted no monthly increase in September. The data thus combined higher annual inflation pressures with slower nominal spending than in the previous month.
The Fed is scheduled to hold its next meeting on December 8 and 9, according to the Federal Open Market Committee calendar, and market rate expectations are focused on that meeting. Before then, the Bureau of Economic Analysis will release its October personal income and spending reading on November 25 at 8:30 a.m. Eastern time. The new reading will follow September data showing annual core inflation rose to 3.1%, while the target rate range remains at 3.75% to 4% under the October decision. The 84.6% figure cited in the Reuters report was an estimate of the probability of a hike when it was published on October 29, not an advance announcement of the meeting's outcome. Available Ethereum data for October 29 and 30 put recorded prices near $2,200, without establishing a close below that level on either day.