The dollar’s decline surprisingly impacted bearish reactions in the commodity market, particularly gold and silver, as markets prepared for a week of economic developments, including the Federal Reserve meeting and the US presidential election.
PCE inflation maintains the Fed’s rate cut trajectory
The Commerce Department’s September PCE report, closely monitored by the Fed, reflected a 0.2% price increase, in line with forecasts. On an annual basis, the PCE index rose 2.1%, the smallest annual increase since early 2021. Excluding food and energy, the core PCE rose 0.3% this month, for an annual increase of 2.7%, underscoring the Fed’s continued target of 2%. % inflation.
Analysts largely expect the Fed to proceed with a 25 basis point rate cut at its upcoming meeting, following the start in September of its policy easing cycle with a substantial half-percentage-point cut.
Despite core PCE inflation rising slightly, some analysts are cautious about a possible renewed acceleration in inflation. Michael Landsberg, CIO of Landsberg Bennett Private Wealth Management, expects a gradual increase in inflation through the end of 2024 and believes the Fed will implement the expected rate cut in November but pause in December if inflation persists.
Similarly, Peter Cardillo, chief market economist at Spartan Capital Securities, noted that elevated core inflation could prompt the Fed to suspend interest rate cuts, especially as consumer spending remains robust.
“Consumption remains strong,” Cardillo said, adding that third-quarter GDP data showed resilient consumer spending, reinforcing inflation concerns.