[The Federal Reserve’s favored inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 2.3% in October from the year before, accelerating from the 2.1% pace in September. On a monthly basis, prices rose 0.2%, matching the gain seen in September. The increase was driven by inflation in the services sector, with prices rising 0.4%, while goods prices increased by 0.1%.
Economists had expected a 0.2% monthly increase and a 2.3% annual rate, according to FactSet. The data was in line with expectations, with some economists forecasting that inflation would rise in October due to stubborn housing-related costs and one-time price hikes.
However, the process of reining in high inflation is expected to be bumpy, with some persistent price pressures, such as rent and mortgage costs, keeping inflation from stabilizing at the central bank’s 2% target. The Fed may be concerned about the trend, but some experts believe a rate cut is still possible in December and a slow pace in 2025.
The core PCE index, which excludes food and gas prices, rose 0.3% on a monthly basis and 2.8% for the 12 months ended in October. Experts predict an ebb and flow in the inflation data, but overall the trend is towards slower inflation.
However, there is concern that this trend could change with President-elect Donald Trump’s plans to implement massive tariffs, which could push the cost of living higher. Trump has announced plans to impose a 25% tariff on all products from Mexico and Canada, and an additional 10% on China, which could lift the PCE price index by 0.5% to 1.1%. The proposed tariffs are an upside risk to inflation forecasts, and economists caution against reacting to the proposals, given the uncertainty around the new administration’s economic team.
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