Minneapolis CNN Business — New inflation data released on Friday showed that while prices remained uncomfortably high in September, the slowdown in wage growth could be moderated to some extent. This is an encouraging development for the Fed as it struggles to bring down its highest inflation rate in 40 years. The Personal Consumption Expenditure Index, which measures the price consumers pay for goods and services, rose 0.3% from August to September, but remained flat this year at 6.2%, according to the latest report from the Bureau of Economic Analysis. Excluding volatile food and energy prices, the Fed’s preferred inflation measure, Core PCE, rose 5.1% on an annualized basis, above the August rate of 4.9%, according to Refinitiv, but below the consensus estimate of 5.2%. From August to September, the core index rose 0.5%, in line with expectations. The jump from the previous month has been adjusted from 0.6% to 0.5%. Separately, the Bureau of Labor Statistics released the latest Employment Cost Index, which shows a slowdown in wage and salary growth in labor costs on a quarterly basis. The central bank is closely watching the ECI report to monitor the extent to which soaring inflation raises wages and fuels inflation. The most recent figures came just days before the Fed discussed another rate hike, and just before Americans voted to vote in the midterm elections. Gregory Daco, senior economist at EY Parthenon, said: “These data show that the Fed is doing more to calm demand, lower inflation and get policymakers to raise the federal funds rate by another 75 basis points at next week’s FOMC meeting. confirms it,” he said. , said in a statement. However, some underlying indicators of an impending recession could mean that next week’s rate hike (expected to be the fourth consecutive 75bps hike) could be the last rate hike of its magnitude, Mark Zandi said. Chief Economist at Moody’s Analytics. “There are a lot of moving parts and a lot of assumptions, but the most likely scenario is that we are in the worst inflation scenario, and the Fed’s [2%] “The goal is by the spring of 2024,” he said. Consumers have been struggling for months with prices firmly anchored at levels not seen since the 1980s. Despite a series of massive rate hikes from the Fed to curb inflation, the most recent CPI (which measures everything from eggs to plane tickets) shows that price increases continue to skyrocket and inflation spreads to commodities as well. showed Sep. Entered the service sector. According to the latest PCE report, Americans rose 0.6% in September compared to August, and income rose 0.4%, but savings levels fell. Even after adjusting for inflation, spending outweighs income. Wells Fargo economists Tim Quinlan and Shannon Seery in a memo on Friday: “Monetary policy works staggered, but at this early stage consumer spending is driven by high inflation and interest rates to control inflation. I’m not a little swayed by the impression,” he said. . However, consumers are not necessarily optimistic about the economy and future prospects. The University of Michigan’s Consumer Sentiment Index for October was 59.9, according to updated survey data released on Friday. This is 10 points higher than the all-time low in June. “Conditions to buy durable goods surged 23% this month, driven by price easing and supply constraints. However, the projected business situation this year has deteriorated by 19%,” said Joanne Hsu, Survey Director. “These different patterns reflect significant uncertainty about inflation, policy responses and developments around the world, and a consumer perspective is consistent with a downturn in the economy.” Beyond the consumer sector, Daco said the broader economy is darkening. “Surprising interest rates, consistently high inflation and increased global uncertainty are undermining business sentiment and urging businesses to make more prudent hiring and investment decisions.” And while the housing market is already being shaken by the effects of soaring mortgage rates, the full economic impact of the Fed’s tightening has yet to be felt, he said. CNN Business’ Tami Luhby contributed to this report.
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