Fed's preferred inflation gauge slows annually in October

Investing.com -- The Federal Reserve's preferred inflation gauge rose at a slower rate on an annual basis in October compared to the prior month, in the latest sign that the central bank's long-standing campaign of interest rate hikes may be working to corral price growth.

Last month's so-called "core" personal consumption expenditures (PCE) price index, which strips out volatile items like food and fuel, eased to 3.5% annually and 0.2% monthly, in line with estimates. In September, they had increased by 3.7% and 0.3%, respectively.

"After fears of 'sticky' and 'persistent' inflation, the month to month slowing in the core [PCE] readings is encouraging," said Kathy Jones, Chief Fixed Income Strategist at Charles Schwab (NYSE:SCHW), in a post on social media platform X.

The overall figure rose by 3.0% annually, decelerating from 3.4% in September thanks in large part to a drop in energy prices. On a monthly basis, the measure stood at 0.0%, down from an uptick of 0.4% in the prior month. Economists expected readings of 3.0% year-on-year and 0.1% month-on-month.

The data could help determine how Fed officials will calibrate interest rates in the coming months. The central bank is widely tipped to leave rates at a range of 5.25% to 5.50% at its meeting next month, although some policymakers have hinted that a pivot away from this unprecedentedly tight stance may be coming soon.

Earlier this week, Fed Governor Christopher Waller, a typically hawkish voice, suggested that "we could start lowering the policy rate" if inflation continues to slow for "several more months." The comments bolstered expectations that the Fed may slash rates as soon as May next year.