The Federal Reserve’s Primary Inflation Index Increased By 0.5% In September

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Last Updated on October 29, 2022 by Bitfinsider

According to a study published by the Bureau of Economic Analysis on Friday, an economic gauge that is carefully followed by the Federal Reserve revealed that inflation remained robust in September while mainly remaining within forecasts.

According to the data, the primary personal consumption expenditures price index went up by 0.5% from the previous month and has gone up by 5.1% over the course of the preceding 12 months. The yearly increase came in slightly lower than the 5.2% that was anticipated by Dow Jones, although the monthly gain was in line with what was expected.

PCE inflation increased by 0.3% for the month and 6.2% on a yearly basis, which is the same as it was in August. This includes food and energy prices.

This news comes at a time when the Federal Reserve is getting ready to implement its sixth interest rate rise of the year at its policy meeting which will take place the following week. The Federal Reserve has been increasing interest rates, with total hikes of three percentage points so far. This is being done in an effort to combat inflation, which is currently running at its fastest pace in nearly 40 years.

The financial markets almost universally anticipate that the Federal Reserve will implement its fourth consecutive 0.75 percentage point increase at the meeting, but they anticipate that the Fed would possibly slow down the pace of raises following that.

Additionally, the Bureau of Economic Analysis stated that individual income rose by 0.4% in September, which was one-tenth of a percentage point higher than the estimate. The growth in spending, as measured by personal consumption expenditures, came in at 0.6%, which was higher than the projection of 0.4%.

When inflation was taken into account, however, there was only a 0.3% increase in total spending. The amount of disposable personal income, or what is left after deducting taxes and other expenses, had a monthly increase of 0.4% but remained same when adjusted for inflation.

The rate of personal savings, which is calculated by dividing annualized savings by annualized disposable income, was 3.1% for the month, which is a decrease from 3.4% in August.

According to a second release that was made available on Friday, the Bureau of Labor Statistics found that employment costs increased by 1.2% for the third quarter, which was in line with predictions. The employment cost index rose by 5% on an annual basis, which is a pace that is marginally slower than the 5.1% growth that was seen in the second quarter.

Fed policymakers pay close attention to the data points that are released on Friday in search of indications about where expenses are headed. This is especially important given the tight labor market, which according to recent statistics from the BLS has 1.7 jobs for every available worker.

The Fed favors the reading from the PCE price index above the consumer price index published by the BLS, which is more frequently followed. The BEA measure takes into account changes in consumer behavior, in particular the purchase of less costly goods, in order to evaluate changes in the cost of living rather than straightforward price movements.

The financial markets speculate that the Federal Reserve may slow down the rate of future rate hikes. Prices for futures contracts as of the beginning of trading on Friday indicated that there is a nearly 60% possibility that the central bank will raise interest rates by 0.5 percentage point in December.

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