The Federal Reserve’s preferred measure of inflation posted the smallest back-to-back increase since late 2020 as the data largely met expectations. The markets ignored the “super core” PCE report, the gauge that tracks services inflation excluding housing and energy, jumped by the largest amount since the start of the year. Several months ago, the “super core” posted a smaller than expected advance and the market’s celebrated.
Depending upon what index is used, the PCE rose between 3.3% and 4.2% year over year, considerably higher than the 2.0% mandated speed limit.
Generally speaking, inflation has declined but is remaining stubbornly elevated in the face of the most aggressive Federal Reserve in history that has increased the overnight rate from 0.00% to 5.5% in 17 months, an increase that is logarithmic.
Markets were mixed on the data, perhaps waiting for today’s unemployment report which was released at 8:30 today.
Non-farm and private sector payrolls rose more than expected. The unemployment rate also increased to 3.8% versus the expected rate of 3.5% as the labor participation rate (LPR) increased to 62.8% versus the expected rate of 62.6%. Wage growth slowed nominally; the data point the market is focusing upon.
Stock futures rose and bond yields fell on the data as it fueled speculation the Fed is finished raising interest rates.
Last night the foreign markets were up. London was up 0.62%, Paris up 0.17% and Frankfurt down 0.08%. China was up 0.43%, Japan up 0.28% and Hang Seng closed for a holiday. Dow and NASDAQ futures are up 035% and 0.15%, respectively. The 10-year is up 9/32 to yield 4.07%.