The Federal Reserve’s inflation gauge, the core Personal Consumption Expenditures (PCE) index, came in below expectations. Core PCE showed a monthly increase of 0.1%, rising to 2.7% annually. Following the data, expectations for a 50 basis point interest rate cut in November from the Fed strengthened.

Personal consumption expenditures in the U.S. recorded a monthly increase of 0.2% in August, falling below expectations. The U.S. Department of Commerce released personal income and spending data for August. Accordingly, personal incomes increased by 0.2% compared to the previous month in August. Market expectations were for personal incomes to rise by 0.4% during this period. The increase in personal incomes in the U.S. was calculated at 0.3% in July. Personal consumption expenditures recorded the lowest increase in 7 months in August with a monthly rise of 0.2%. Market expectations were for the data to increase by 0.3% during this period. Personal consumption expenditures showed a 0.5% increase in July. THE LATEST ON FED’S INDICATOR Personal consumption expenditures price index also increased by 0.1% monthly and 2.2% annually in August. The index, which recorded its lowest increase since February 2021 annually in this period, was expected to increase by 0.2% monthly and 2.3% annually. The index increased by 0.2% monthly and 2.5% annually in July. The core Personal Consumption Expenditures price index, which the Federal Reserve considers as an inflation gauge, excluding food and energy, increased by 0.1% monthly and 2.7% annually in August. While the annual change in the index occurred parallel to market expectations, an increase of 0.2% monthly was predicted. The core Personal Consumption Expenditures price index increased by 0.2% monthly and 2.6% annually in July. HOW DID THE MARKETS RESPOND? Following the data, short-term interest rate futures contracts in the U.S. recorded gains. There was also an increase in futures contracts for the stock market. Losses in the dollar index intensified. The index fell to 100.37, down by 0.22%. Market expectations for a 50 basis point interest rate cut by the Fed in November strengthened in the markets.