CHICAGO FEDERAL RESERVE BANK PRESIDENT GOOLSBEE DISCUSSES FED’S MOVES ON INFLATION
The Chicago Federal Reserve Bank President Austan Goolsbee recently spoke on The Claman Countdown about the impact of the Federal Reserve’s moves on inflation. The Commerce Department recently reported that the personal consumption expenditures (PCE) index rose 0.2% in October and 2.3% year over year.
The PCE headline figure rose from 2.1% in September and equaled the 2.3% reading from August, suggesting that inflation ticked slightly higher. However, the core PCE, which excludes volatile food and energy prices, rose 0.3% for the month and increased 2.8% from a year ago, in line with estimates.
The Federal Reserve is focusing on the PCE headline figure as it tries to bring the pace of price increases back to 2%. Policymakers view the core data as a better indicator of inflation. The core PCE data showed that prices for goods were down 1% from a year ago, while prices for services were up 3.9% in that timeframe.
Wages and salaries were up 0.5% in October compared with last month, following monthly wage and salary growth of 0.5% in August and 0.4% in July. The personal savings rate as a percentage of disposable income was 4.4% in October, up slightly from the 4.1% measurement last month.
The data comes as the Federal Reserve is preparing to meet next month to discuss its next move on interest rates. The market’s expectations that the Fed will cut rates by 25 basis points next month increased following the PCE release, as traders now see a 69.7% chance of a cut that size at the December meeting.
Economists are divided on the Fed’s next move, with some noting that the momentum in inflation has sputtered recently but not enough to prevent the Fed from cutting interest rates in December. Others believe that the Fed remains concerned about lower wage earners still struggling with higher interest rates and small businesses coping with higher prices and bank loans.
The Fed is approaching its rate-cutting campaign through the lens of its dual mandate of ensuring price stability and maximum employment, and with inflation still near its 2% target, it remains to be seen what action the Fed will take at its next meeting.