Source: Jin10 Data
Author: Yang Large Cap
The market expects the Federal Reserve to cut interest rates again in 2024. According to CME Group's Federal Reserve Watch tool, the market anticipates a 67% chance of a rate cut at the December meeting.
The inflation indicator most favored by the Fed accelerated in October compared to the same period last year, which helps explain policymakers' more cautious stance on interest rate cuts.
Data released on Wednesday showed that the U.S. October PCE price index rose to 2.3% from the previous 2.1% year-on-year, with a flat monthly growth rate of 0.2%; on the core side, the U.S. October core PCE price index rose slightly to 2.8% from the previous 2.7% on a month-on-month basis, with a flat monthly growth rate of 0.2%.
After the data was released, spot gold fell more than $10 in the short term, while the dollar index rose by over 10 points.
The core PCE annual rate remains close to 3%, rather than 2%, complicating the decisions the Fed is about to make. In September, in response to signs of an economic slowdown, the Fed initiated a rate cut cycle with a reduction of 50 basis points. However, in recent months, progress on inflation has stagnated, making it possible for the Fed to pause rate cuts at the two meetings in December or January next year.
Earlier this month, the core CPI indicated that inflation rose 3.3% year-on-year in October for three consecutive months. Meanwhile, the core Producer Price Index (PPI) showed that prices increased by 3.1% year-on-year in October, higher than the previous value of 2.8%, and also above the economists' predicted increase of 3%.
At this moment, the economic agenda of President-elect Trump will make the future policy path of the Federal Reserve more complicated. Stanley Black & Decker Inc. stated that due to expected tariff increases, the company is considering raising prices early next year.
PCE data was released following a series of other economic data ahead of the Thanksgiving holiday on Thursday. Another government report on Wednesday showed that, driven by healthy growth in household and business spending, the usa's GDP grew by 2.8% in the third quarter.
In a recent speech, Federal Reserve Board Governor Bauman stated that the Fed's progress towards achieving the 2% inflation target has been "stalling", and emphasized caution in Fed interest rate cuts. Bauman said in a speech at the Palm Beach Forum Club: "Since early 2023, we have made significant progress in reducing inflation, but progress seems to have stalled in recent months."
Nevertheless, the market expects the Fed to cut interest rates again in 2024. According to the CME FedWatch Tool, the market sees a 67% probability of the Fed cutting rates at the December meeting.
Editor/Jeffy
