September PCE: Inflation rose further from the Fed's target

Key Points:

• The Federal Reserve's preferred inflation gauge, the personal consumption expenditures (PCE) index, rose 0.5% in September and 3.6% year over year, moving further away from the Fed's 2% target and indicating persistent inflation pressures.
• Core PCE, excluding food and energy, increased 0.3% monthly and 3.1% annually, both in line with expectations, while goods prices rose 3.9% and services prices 3.5% year over year.
• The third-quarter GDP grew 3.4%, surpassing economists' estimates, driven by strong personal consumption and federal government spending, signaling resilient demand despite inflation concerns.
• Market expectations remain for a 25 basis point Fed rate hike in December, with a 79.6% probability according to CME FedWatch, as policymakers consider further tightening amid inflation above target.
• Following the report, U.S. stock indices fell, with the S&P 500 down over 0.4%, the Dow Jones down 0.3%, and the Nasdaq dropping more than 1.4%, reflecting investor concerns over inflation and interest rate prospects.