The Fed’s Preferred Measure of inflation Eased Further

Softer US Inflation

Today's data showed the Fed's preferred measure of inflation, the Core Personal Consumption Expenditures (PCE) moderated to 4.7% y/y in November, from 5% previously. This was the lowest since July and marked the third straight month of deceleration.

The all-inclusive headline PCE climbed down to +5.5% y/y, from 6.1% in the previous month. It was the lowest figure since November of 2021 and the first sub-6.0% reading of the current year.

This comes just after last week's soft Consumer Price Index (CPI) report, highlighting the fact that inflationary pressure have been easing for a while now. This situation allowed the Fed to downshift to a 0.5% interest rate increase this month, after a series of outsized 75 basis points hikes.[1]

However, the central bank maintained its hawkish stance and guidance for "ongoing increases" in the benchmark rate, since labor market remains tight. The US economy added a robust 263,000 jobs in November, Unemployment stayed at a historically low 3.7% and wages rose, suggesting that the Fed has more work to do on the tightening front.

The USDOLLAR is helped in the immediate aftermath of today's PCE report and SPX500 is mixed, with both having a muted initial reaction.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 31 Jan 2023 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221214.htm

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