The growth rate of the US personal consumption expenditure (PCE) price index slowed in November, indicating that inflation has continued to fall, but there is still a distance from the Federal Reserve’s inflation target (Fed) and interest rates will continue to rise in the future There is a high probability of raising interest rates by 1 yard in February. Meanwhile, US personal spending stagnated last month, underscoring that the Fed’s monetary tightening is cooling price pressures and ample demand.
According to data released by the Ministry of Commerce on Friday (23), the PCE price index in the United States rose 5.5% year on year in November, in line with market expectations, but fell sharply from the value previous revised 6.3%, slowing for fifth consecutive month; Fed preference The inflation index, the core PCE price index excluding food and energy prices, rose 4.7% in November, 5% lower than its previous value, and also lower than the 4. 8% estimated by the Federal Open Market Committee (FOMC) at its December meeting, but market forecasts are conflicting, with Bloomberg forecasting 4.6%.Dow JonesForecast 3.7%.
On a monthly basis, the November PCE US price index rose by 0.1%, in line with market expectations, and the previous value was revised upwards from 0.3% to 0.4%; the core PCE price index increased by 0.2%, in line with expectations, and the previous value was revised upwards from 0.2% to 0.4%.0.3%.
At the same time, the Ministry of Commerce announced on the same day that personal income grew by 0.4% in November, higher than the expected 0.3%, the previous value was 0.7%; personal spending fell 0.1% last month, a lower than expected 0.2%, the previous value was 0.8% It was revised upwards to 0.9%.
It is worth noting that the inflation-adjusted monthly growth rate of personal real spending in November was 0%, lower than the 0.1% expected and the previous value was 0.5%. The slow growth in the data shows that the Fed’s tightening monetary policy not only cools prices Demand also cools.
In addition, inflation-adjusted spending on goods fell 0.6% in November, the worst since February, while spending on services rose 0.3%, while the savings rate rose to 2%. .4% in November, the first increase since July. new all-time low.
Inflation cools, but not enough for the Fed to suspend rate hikes
Foreign media reports pointed out that although US inflation continues to decline, it is still far from the level that allows the Fed to suspend interest rate hikes. With the current inflation situation, the Fed will continue to hike rates future interest rates as long as inflation and expectations of inflation at a level acceptable to the Fed. Fed Chairman Jerome Powell said last week that “substantial evidence” is needed to be sure inflation continues to fall .
Looking ahead, the Fed is likely to continue raising interest rates next year, higher than many investors expect, and will remain tight for some time. As for the size of the interest rate hike in February, Powell said it would depend on the latest data, and economic data for December would be announced in January next year.
According to the CME FedWatch Tool, the US federal funds rate futures market estimates that the probability of raising interest rates by 1 yard (25 basis points) in February next year is 67.4%, and the probability of raise interest rates by 2 yards (50 basis points) basis points) is 32.6%, and the terminal interest rate falls in the range of 4.75% to 5%.
expert opinion
Bloomberg economists Anna Wong and Eliza Winger said strong personal income suggests the job market hasn’t cooled and Fed officials are unlikely to think the report will convince them to abandon the interest rate hike by federal reference over 5%.
Sal Guatieri, senior economist at BMO Capital Markets in Toronto, said businesses may not be far behind as consumers begin to cut back on spending, as tighter monetary policy and weaker financial conditions weigh on the economy next year.
