Today’s PCE deflator report was in line with market expectations but was sufficiently high to support the market’s current thesis that the Fed will keep interest rates higher-for-longer. The PCE deflator is the Fed’s preferred inflation measure.
The market this week reduced the chances for a Fed hike in December, but opened up the chances of a Fed rate hike in January. Today’s PCE deflator report had little impact on Fed expectations but supported the overall idea that the Fed might not be done raising interest rates and that the Fed could raise rates as late as January.
