The eagerly awaited core personal consumption expenditures data, which is a priority inflation indicator for the Fed, was recently released in the US, along with the global markets. It is known that the Fed takes into account the core personal consumption expenditures data, excluding food and energy, when making interest rate decisions. Therefore, the announced data was closely monitored due to its significant importance for the markets.
Fed’s Priority Inflation Indicator Revealed
The core personal consumption expenditures data, which is the Fed’s priority inflation indicator, was announced in the US with great anticipation. Core personal consumption expenditures showed a 0.1% increase on a monthly basis in August, which was below expectations (0.2%). The annual core personal consumption expenditures data was also announced at 3.9%, in line with expectations (3.9%). The previous month’s data had shown a 4.2% increase.
The annual core personal consumption expenditures data, which had increased by 5.3% on March 31, 2022, reaching the highest level since 1983, had prompted the Fed to take action on a tight monetary policy.
On the other hand, personal incomes in the US increased by 0.4% in August, in line with expectations (0.4%). The previous data had shown a 0.2% increase. Personal expenditures in the US, on the other hand, contracted by 0.4% in August. Expectations were for a 0.4% contraction. The previous data had indicated a 0.2% contraction.
Expectations After the Announced Data
In its September meeting, the Fed decided to keep interest rates at the highest level in 22 years. The Fed had signaled the possibility of a rate hike by the end of the year while keeping the policy rate at 5.25-5.5%. In the statement made by the Fed, it was stated that the latest indicators indicated solid economic growth and that future data regarding interest rate hikes would be closely monitored.
With the announced data, the probability of the Fed keeping interest rates unchanged in its meeting on November 1 is priced at 82.7% in the global markets, along with the crypto market. Just before the release of the data, this probability was priced at 85.8%.
There is a 17.3% probability for a 25 basis point interest rate hike. Just before the release of the data, the probability of a 25 basis point interest rate hike was at 14.2%.
