Inflation as measured by personal spending increased in line with expectations in October, possibly giving the Federal Reserve more incentive to hold rates steady and perhaps start cutting in 2024.
The personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis, the Commerce Department reported this morning. Both numbers aligned with the Dow Jones consensus.
Headline inflation was flat on the month and at a 3% rate for the 12-month period, the data showed. Energy prices fell 2.6% on the month, helping keep overall inflation in check, even as food prices increased 0.2%.
Goods prices saw a 0.3% decrease while services rose 0.2%. On the services side, the biggest gainers were international travel, health care and food services and accommodations. In goods, gasoline led the gainers.
Personal income and spending both rose 0.2% on the month, also meeting estimates and indicating that consumers are keeping pace with inflation.
While the public more closely watches the Labor Department’s Consumer Price Index as an inflation measure, the Fed prefers this core PCE reading.
Markets already had been pricing in the likelihood that the Fed is done raising interest rates this cycle, and the PCE reading, along with signs of a loosening labor market, could solidify that stance.
Related: Consumer Confidence Rose for First Time in Four Months
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Consumer Confidence Rose for First Time in Four Months