Core PCE Data: Results Falling Short of Expectations

Core PCE Data Falls Below Expectations

One of the hot topics on the agenda in recent days is the Core PCE data, which is catching the attention of investors with the figures for September. This data, announced at 2.8%, was slightly below expectations and was set at 2.9% last month. These figures observed on an annual basis provide critical insight for the Federal Reserve (Fed).

Monthly Increase and Inflation Target

According to the data, a monthly increase of 0.2% was recorded. This situation indicates that price pressures have not reversed and that the inflation level continues to remain above the Fed’s target of 2%. The risk of sticky inflation continues to be a critical element from a monetary policy perspective.

Interest Rate Cut Expectations and Market Responses

The fact that the Core PCE data did not create a surprise this month does not hinder the possibility of an interest rate cut by the Fed in its upcoming meeting. However, the weakening growth outlook and the loss of strength in employment indicate that the economy's resistance to high interest rates is diminishing. Therefore, the Fed may have to cut rates in an environment where inflation is not rapidly easing.

Initial Market Reactions

Following the data release, initial market reactions remained at moderate levels. Due to its delayed nature, U.S. indices are maintaining their horizontal positive trends. This reveals that the market is assessing the data in a way that it will not impact Fed decisions. The likelihood of a 25 basis point cut remaining at 87% in the upcoming Fed meeting sustains expectations among investors.

FOMC Meeting and Future Expectations

Another important factor from the Fed side is the dot plot forecasts that will be announced in the FOMC meeting scheduled for December 10. Officials emphasizing weaknesses in the labor market over inflation suggests that a single inflation figure will not radically change the policy stance. However, if the Core PCE remains high in the coming months, it may alter expectations for the following year.

This information does not constitute investment advice. Please be careful when making your investment decisions.