Interest-rate futures put the likelihood of a December Federal Reserve increase at about 35%, according to CME FedWatch. Goldman Sachs, meanwhile, has moved its prediction for the next hike to December rather than October after August inflation came in below expectations.
The bank’s inflation projections are now more subdued than the Fed’s. Goldman expects fourth-quarter core personal consumption expenditures inflation of 3.0% compared with the same quarter a year earlier; the median forecast from Fed officials is 3.4%.
U.S. price data for August came in softer than forecast, reducing the odds that the Federal Reserve will tighten policy again at its October meeting. That did not translate into broad buying across the region. Strong results from AI chipmaker Micron also did little to brighten sentiment, and the deadlock in talks between Washington and Tehran over ending the seven-month conflict in the Middle East kept crude at elevated levels.
According to the Commerce Department’s Bureau of Economic Analysis, the Personal Consumption Expenditures (PCE) price index gained 0.3% month on month in August, below the 0.4% median forecast in a Reuters poll. July’s gain was revised to 0.1% from 0.2%. A 4.4% recovery in gasoline costs accounted for the monthly increase, while food prices were flat.
On a yearly basis, PCE inflation stood at 3.4% in August, level with the revised July figure. July had originally been reported at 3.7%.
Changes to the methodology for measuring portfolio management prices contributed to that annual slowdown. Those adjustments lowered previously reported figures by more than had been expected.
On Wednesday, Goldman reassessed its rate outlook following both the inflation release and remarks by New York Fed President John Williams. Although December remains the bank’s forecast for another increase, Goldman cautioned that the Fed may have already finished raising rates.
