Week of 09/23-09/27 FED's Preferred Inflation Metric Cools

The stock market is set to end the week on a green note as the FED's preferred inflation gauge shows prices increased less in the month of August. This report is important to not only the FED, but to traders and investors looking at what drivers could impact the next rate cut decision towards the end of the year. The FED has two more FOMC meetings scheduled for 2024, November 6-7 and December 17-18, in which changes in monetary policy could happen. Forecasts now include a 25-basis point rate cut for November and another similar cut in December. This would put the total for another 50-basis points before the end of the year. Tesla stock has been rallying this week due to China sales, with the stock reaching a high just above $260 per share. Costco reported mixed earnings that came in below analysts expectations which caused the stock to drop close to 3% at the market open. Overall, the market indexes have responded well to the recent rate cut with the S&P 500 reaching a weekly high of $5,760 per share.

Why is the PCE an important metric for the FED?

The Personal Consumption Expenditures (PCE) index is an important metric for the Federal Reserve (Fed) because it is a key measure of inflation that reflects the changes in prices of goods and services bought by consumers. The Fed closely monitors the PCE index to assess the level of inflation in the economy and make informed decisions regarding monetary policy, such as interest rate adjustments. By analyzing the PCE index, the Fed can gauge the purchasing power of consumers, anticipate economic trends, and implement measures to achieve its dual mandate of price stability and maximum sustainable employment.