The year-on-year increase of PCE in the US rose to 3.6% in September, and the Federal Reserve's interest rate hike in December is expected to remain high

The Zhitong Finance App learned that data released by the US Bureau of Economic Analysis on Thursday showed that the US PCE price index rose 3.6% year on year in September, in line with expectations. The previous value was 3.4%; the month-on-month increase was 0.5%, in line with expectations. The previous value was 0.3%. The September core PCE price index, which excludes food and energy, rose 3.1% year on year, in line with expectations. The previous value was 3.0%; the month-on-month increase was 0.3%, in line with expectations. The previous value was revised from 0.2% to 0.3%. The 3.6% overall PCE increase and the 3.1% year-on-year increase in core PCE were the highest levels in four months.

As the Federal Reserve's preferred inflation indicator, the PCE price index was above the official target of 2% for the 68th month in a row in September, which means that high inflation has continued for nearly six years. The day before the data was released, the Federal Reserve kept the federal funds rate target range of 3.75% — 4.00% unchanged with a 10-2 vote. Among them, Federal Reserve Governor Cook and Cleveland Federal Reserve Chairman Hammark voted against and insisted on raising interest rates by 25 basis points.

At the press conference after the interest rate decision was announced, Federal Reserve Chairman Walsh still declined to provide forward-looking guidance and reiterated that the 2% inflation target measured by PCE “has no soft target,” indicating that he still has a hawkish stance on inflation. According to data released tonight, the core PCE in September was still significantly higher than the target of 3.1% compared to the same period last year. According to CME's “Federal Reserve Watch” tool, the probability that the market price will raise interest rates by 25 basis points in December after the announcement of the resolution is close to 83%.

Although the PCE price index data released tonight is generally in line with market expectations, it is still higher than the Federal Reserve's target, indicating that inflationary pressure continues. Combined with the Federal Reserve's latest resolution statement that “as more information is obtained, the committee will be able to further judge the appropriate policy position,” this latest inflation data may support the Fed to raise interest rates again in December.