Sticky Inflation Shows Signs of Moving After November Data

The Personal Consumption Expenditures (PCE) price index for November came in lower than many had expected. PCE inflation for November was reported at 2.4%, a slight increase from 2.3% in October, but below the anticipated 2.5%.

Expert Insights: Economists are currently analyzing the implications of the cooler PCE data and what it could mean for the Federal Reserve and the market as we approach 2025.

According to Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley, "Sticky inflation appeared to be a little less stuck this morning." He mentioned that the Fed's preferred gauge of inflation being lower than expected might ease some of the market’s disappointment following the Fed's recent interest rate announcement.

Market reactions have so far been positive; with all major indices showing gains. The SPDR S&P 500 (ARCA: SPY) has risen by 1.7% to $594.40, while the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100 index, is up by 1.8% at $523.54 at the time this report was prepared.

Joe Brusuelas, chief economist at RSM US, believes it is "increasingly likely" that the economy has accelerated in the current quarter. This could lead to renewed concerns about inflation growth and provoke a more hawkish approach from the Federal Reserve.

Brusuelas added, "As we approach the turn of the year, it’s almost certain we will see an uptick in service prices and rents. This will likely cause the Fed to adopt more cautious language, indicating a shift in policy focus towards price stability rather than employment in 2025."

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Inflation, Markets, Economy