September US PCE inflation ticks up, as expected

(Reuters) - The Commerce Department's personal consumption expenditures (PCE) price index, closely watched by the Federal Reserve, increased 0.2% in September after an unrevised 0.1% gain in August. Economists had forecast PCE inflation climbing 0.2%.

In the year through September, the PCE price index increased 2.1%, the smallest year-on-year rise in PCE inflation since February 2021 and followed a 2.3% advance in August. Excluding food and energy, the PCE price index rose 0.3% after increasing 0.2% in August and year over year rose 2.7%. The Fed tracks the PCE price measures for its 2% inflation target and progress toward that target is expected to allow the Fed to cut interest rates another 25 basis points at its meeting next week.

The U.S. central bank last month launched its policy easing cycle with an unusually large half-percentage-point interest rate cut, the first reduction in borrowing costs since 2020.

MARKET REACTION:

STOCKS: U.S. stock futures slightly extended overnight slippage and were last of 0.66%, pointing to a weak Wall Street open

BONDS: The U.S. Treasury 10-year yield ticked lower to 4.2844% and the two-year yield eased to 4.1682%

FOREX: The dollar index was off 0.2%, a tad softer than before the data

COMMENTS:

MICHAEL LANDSBERG, CHIEF INVESTMENT OFFICER, LANDSBERG BENNETT PRIVATE WEALTH MANAGEMENT, PUNTA GORDA, FLORIDA (EMAILED)

"Even though Thursday's core PCE moved only slightly higher, we believe this is the first in a series of months and quarters where we see an increase in inflation. Investors should be prepared for a re-acceleration of inflation in late 2024 and early 2025."

"We believe the Fed is still poised to cut interest rates in November by 25 basis points, but we believe the Fed will pause any rate cuts in December amid fears about a re-acceleration of inflation."

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

"The suggestion that inflation could tick up a bit more was basically confirmed in today's number, and the sticky part here is the core rate, which continues to move higher."

"And that just simply means that the Fed could very well pause at its next meeting. I think the chances of a Fed pause is greater now than ever."

"Consumption remains strong, and we've seen that with other macro indicators. Just yesterday, with the gross domestic product in the third quarter, we saw consumer spending was strong."

"So, what we what we have here is an economy that's doing quite nicely, but inflation still is a bit of a problem and the fact that the core rate continues to stay somewhat elevated."

"It's a concern, and that means that the Fed could pause next week."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

"Real disposable personal income has four months in a row of 0.1% growth. Spending has grown, but it's increasingly concentrated in non-discretionary areas like health care, prescription drugs, housing, and utilities. I'd like to jump on the bandwagon that says the consumer is doing great, but the details don't really support that. The headline numbers look good, but details matter to individuals."

(Compiled by the Global Finance & Markets Breaking News team)