by paul gomme and peter rupert
The BEA announced that the personal consumption expenditures price index (PCE) for October increased 2.89% on an annualized basis (2.18% in September) , the highest reading since April of this year. The year over year number rose 2.31% (2.18% in September) and our trend measure rose 2.23% (1.91% in September). The increase largely came from the price index for services, rising 4.60% on an annualized basis. The year over year increase was 3.88% and our measure of trend was up 3.78%. Goods prices, on the hand, fell 0.73% and have been declining since May of 2024. Year over year, goods prices fell 0.98% and our trend measure fell 1.05%.
The Fed’s preferred measure, PCE ex food and energy (PCEX) rose 3.32% (3.18% in September)on an annualized basis, 2.80% year over year (2.65% in September) and our trend measure came in at 2.81% (2.56% in September).
The bottom line is that the inflation numbers are drifting away from the Fed’s 2% target. Staying ahead of the curve should be job one for the Fed. While many are anticipating another 25 bp cut at the next meeting, it might be time for a pause.
