The Federal Reserve's Preferred Inflation Data Just Cooled And Risk Assets Are Flying: What's The Fed's Next Move?

The SPDR S&P 500 SPY is on the rise Thursday morning after the Bureau of Economic Analysis reported a 6% increase in the personal consumption expenditures price index in October.

What Happened: The headline PCE came in at 6% for October, down from 6.2% in September.  The number was in line with average economist estimates, according to Benzinga Pro.

Core PCE, which excludes volatile food and energy prices, was up 5% in September, in line with average economist estimates. 

In other economic news, jobless claims decreased by 16,000 for the week ending Nov. 26 to 225,000 from an upwardly revised level of 241,000 in the prior week, according to data the Labor Department released on Thursday.

The number came in below average economist estimates of 235,000.

Continuing claims jumped to 1.608 million in the week ended Nov. 19, marking the highest levels since February. The number was up 57,000 from the previous week's revised level.

Why It Matters: The Fed's preferred inflation measure appears to be showing signs of cooling following an aggressive series of four consecutive 0.75% rate hikes.

Most expect the Fed to opt for a smaller 0.5% rate increase at its final meeting of the year on Dec. 14. Thursday's data appears to be a step in the right direction if the market's moves is any indication. Assets that tend to move with rates immediately started to pop, with gold prices rising in the immediate aftermath, while Nasdaq QQQ and S&P futures also moving higher.  
 

At the central bank's last meeting, Fed Chair Jerome Powell said there is still significant uncertainty around the level of interest rates that will be sufficiently restrictive to bring inflation down to its 2% goal.

Powell provided additional insight during a Brookings Institution speech on Wednesday, suggesting the Fed may begin slowing the pace of rate hikes as soon as this month.

The Fed will get to see several new data sets over the next two weeks before it makes its decision, beginning with Friday's payroll report.

Nonfarm payrolls are expected to have increased by 200,000 jobs in November after rising by 261,000 in October, per Reuters. 

SPY Price Action: The SPY was up 0.31% at $408.95 at time of publication, according to Benzinga Pro.

Photo: Gerd Altmann from Pixabay.