Washington, DC – The US Department of Commerce announced that the Personal Consumption Expenditures (PCE) Price Index rose 2.8% in September compared to the same period last year. This is the highest level the index has reached since March 2024, when it stood at 2.9%.
The index recorded a 0.3% increase on a monthly basis. It has continued its upward trend for the fifth consecutive month since April, when its annual growth reached 2.3%.
The core index rises 2.8%
The core personal consumption expenditures price index, which excludes food and energy, also rose by 2.8% year-on-year and by 0.2% month-on-month, in line with economists’ expectations.
The annual increase in the main index fell slightly short of Dow Jones’ 2.9% forecast. However, the monthly increase and core figures matched analysts’ estimates.
Personal spending and income exceed market expectations
Data showed that nominal personal consumption expenditures rose 0.3% month-on-month in September. This figure was lower than the market expectation of 0.4%. Meanwhile, nominal personal income rose 0.4% month-on-month, exceeding expectations of 0.3%.
The PCE index is the primary benchmark used by the Federal Reserve to assess inflation’s progress toward its 2% target. It is preferred over the more commonly used Consumer Price Index (CPI).
Limited impact on interest rate cut expectations
The September data was delayed by more than a month due to the federal government shutdown. However, the rise in the index did little to alter market expectations regarding a potential interest rate cut in December, given that the figures fell within the general forecast range.
As this month’s monetary policy meeting approaches, reports indicate a split within the Federal Reserve. Some advocate for a 0.25 percentage point interest rate cut to address weak employment, while others prefer maintaining current rates due to inflation risks.
Analysts believe the balance tips slightly in favor of those supporting a cut, as they express greater concern about declining employment than about inflation.
87% probability of an interest rate cut
According to the FedWatch index of the Chicago Board of Trade (CME), futures markets are pricing in an 87% probability that the Federal Open Market Committee (FOMC) will cut its benchmark interest rate by 0.25 percentage points from its current level of 3.75%–4.00% at its meeting scheduled for this morning.
