The latest data suggests a potential slowdown in inflation, which could lead the Federal Reserve to halt its interest rate hikes. The cost of goods and services remained steady in October, with the PCE price index indicating a broader easing of price pressures. This was partly due to a decline in oil prices. The year-on-year inflation rate decelerated to 3% from the previous month’s 3.4%.
The core PCE index, excluding food and energy, also saw a slight increase of 0.2% in October, aligning with economists’ forecasts. The Federal Reserve considers this core index a more reliable indicator of future inflation. Over the past year, the core rate of inflation slowed to 3.5% from September’s 3.7%, reaching its lowest level since spring 2021.
Despite inflation remaining above the Fed’s 2% target, senior Fed officials and many Wall Street economists believe that interest rates are now at an appropriate level to achieve the target within the next year or two. Investors are also anticipating that the Fed will no longer raise interest rates. In just 18 months, the central bank has increased its benchmark short-term rate from nearly zero to a peak of 5.5%.
Before the markets opened on Thursday, both the Dow Jones Industrial Average (DJIA) and S&P 500 were expected to experience gains in trading. The yield on the 10-year Treasury note stood relatively unchanged at 4.29%.