November Inflation Numbers, Fed Rate Cut Weigh on Stock Market
Prices remained steady in November, with a 0.1% increase, according to the Commerce Department’s personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation gauge. The annual inflation rate fell to 2.4%, still above the Fed’s 2% target, but lower than the 2.5% estimate. The core reading, which excludes food and energy, rose 0.1% monthly and 2.8% annually, both slightly below forecast.
The report showed little increase in goods prices, with a 0.2% rise, and services prices increased 0.2%. Food and energy prices both rose 0.2%. Housing inflation, a key component, cooled off in November, with a 0.2% increase.
Personal income rose 0.3%, below the 0.4% estimate, while personal spending increased 0.4%. The personal saving rate fell to 4.4%.
The report came just two days after the Federal Reserve cut its benchmark interest rate to a target range of 4.25%-4.5%. Fed Chair Jerome Powell said inflation has "moved much closer" to the Fed’s goal, but the expected path for rate cuts was reduced due to expectations of higher inflation in the coming year. Stock market futures and Treasury yields fell following the report, while a strategist at E-Trade Morgan Stanley noted, "The Fed’s preferred inflation gauge came in lower than expected, which may take some of the sting out of the market’s disappointment with the Fed’s interest rate announcement on Wednesday."
