Fed seen on pause in October after inflation data
TLT•An October Federal Reserve rate hike looked less likely after August PCE inflation rose 3.4% year over year, below economists’ 3.7% estimate. Futures priced about a one-in-three chance of an October hike, while traders continued to expect a hike by December.
1. Inflation data eases pressure
The Personal Consumption Expenditures Price Index rose 3.4% in the 12 months through August, matching July’s downwardly revised 3.4% and below economists’ 3.7% forecast. Inflation remained above the Fed’s 2% target.
2. October hike bets recede
Futures contracts on Wednesday priced about a one-in-three chance of an October rate hike, while traders continued to price in a hike by December. The Fed’s October 27-28 meeting will follow a monthly jobs report due Friday and a report on September consumer inflation. New York Fed President John Williams said he saw “no urgency” for another increase after September’s rate hike, while saying another hike by year-end would likely be needed.
