October US Core PCE Inflation Rate Unchanged at 1.7%

The October Personal Consumption Expenditure (PCE) price index increased 0.2%, the same increase recorded in September and August, with the annual increase strengthening to 1.4% from 1.2% previously.

Excluding food and energy, there was a 0.1% increase in prices with the annual increase remaining at 1.7% for the third successive month.

The Federal Reserve has a 2% target for the core PCE inflation rate and, although the rate has edged fractionally higher this year, the rate is still below the 2.0% level and has only increased slightly from 1.6% seen in March 2016.

The data will not have an impact on the December FOMC meeting with the Federal Reserve still determined to push ahead with an increase in the Fed Funds rate given the tightness in the labour market and expectations that inflation will rise to the 2.0% area.

If there is no significant increase in the core PCE inflation rate, however, the more dovish members on the FOMC committee will argue that inflation is not a serious issue and they will look to block any further rate increases, at least early in 2017. The more hawkish members would also find it more difficult to justify further rate increases and this will be a key focus over the next few months.

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.