The growth rate of the US personal consumption expenditures (PCE) price index slowed down in November, indicating that inflation continued to cool down, but there is still a distance from the inflation target of the Federal Reserve (Fed), and interest rates will continue to be raised in the future. There is a high probability of raising interest rates by 1 yard in February. Meanwhile, U.S. personal spending stagnated last month, underscoring that the Fed’s monetary tightening is cooling price pressures and broad demand.
According to the data released by the Ministry of Commerce on Friday (23rd), the PCE price index in the United States increased by 5.5% year-on-year in November, in line with market expectations, but fell sharply from the revised previous value of 6.3%, slowing down for the fifth consecutive month; Fed preference The inflation index, the core PCE price index excluding food and energy prices, increased by 4.7% in November, 5% lower than the previous value, and also lower than the 4.8% estimated by the Federal Open Market Committee (FOMC) at its December meeting. However, the market forecasts are mixed, with Bloomberg forecasting 4.6%,Dow JonesForecast 3.7%.
On a monthly basis, the U.S. November PCE price index grew by 0.1%, in line with market expectations, and the previous value was revised up from 0.3% to 0.4%; the core PCE price index increased by 0.2%, in line with market expectations, and the previous value was revised up from 0.2% to 0.4%. 0.3%.
At the same time, the Ministry of Commerce announced on the same day that personal income in November grew by 0.4%, higher than the expected 0.3%, the previous value was 0.7%; personal spending fell by 0.1% last month, lower than the expected 0.2%, the previous value was 0.8% It was revised up to 0.9%.
It is worth noting that the inflation-adjusted monthly growth rate of personal real spending in November was 0%, which was lower than the expected 0.1%, and the previous value was 0.5%. The sluggish growth in the data shows that the Fed’s tightening monetary policy is not only cooling prices Demand is also cooling.
In addition, inflation-adjusted spending on goods fell 0.6% in November, the worst since February, while spending on services rose 0.3%. At the same time, the savings rate climbed to 2.4% in November, the first increase since July. A new low on record.
Inflation cools, but not enough for Fed to pause rate hikes
Foreign media reports pointed out that although US inflation continues to ease, it is still far from the level that allows the Fed to suspend interest rate hikes. Under the current inflation situation, the Fed will continue to raise interest rates in the future until inflation and inflation expectations to a level acceptable to the Fed. Fed Chairman Jerome Powell said last week that “substantial evidence” is needed to be confident that inflation is continuing to decline.
Looking ahead, the Fed is likely to continue raising interest rates next year, to a higher level than many investors expect, and to remain restrictive for some time. As for the scale of raising interest rates in February, Powell said that it will depend on the latest data, and economic data for December will be announced in January next year.
According to the CME FedWatch Tool, the US federal funds rate futures market estimates that the probability of raising interest rates by 1 yard (25 basis points) in February next year is 67.4%, and the probability of raising interest rates by 2 yards (50 basis points) is 32.6%, and the terminal interest rate falls in the range of 4.75% to 5%.
expert opinion
Bloomberg economists Anna Wong and Eliza Winger said strong personal income suggested the labor market hadn’t cooled and Fed officials were unlikely to think the report would convince them to abandon raising the federal benchmark interest rate above 5 percent.
Sal Guatieri, senior economist at BMO Capital Markets in Toronto, said businesses may not be too far behind as consumers start to pull back on spending, as tighter monetary policy and weaker financial conditions will weigh on the economy next year.
