ZCZC
BCN-11
US-INFLATION-PCE
Key US inflation measure holds steady in October
WASHINGTON, Nov 28, 2019 (BSS/AFP) – A closely-watched government
inflation gauge confirmed Wednesday that US price pressures remain tame in
October, for now easing any concerns about the Federal Reserve’s round of
interest rate cuts.
The so-called PCE price index — the Fed’s preferred measure — showed
annual inflation remained a low 1.3 percent in October, the same as in
September, according to the Commerce Department report.
Excluding volatile food and energy prices, the “core” PCE inflation index
slowed slightly to 1.6 percent from 1.7 percent in the prior month,
retreating back to its July level.
These rates are well below the Fed’s two percent inflation goal, which was
finally achieved last year for the first time since the end of the global
financial crisis.
But a slowing global economy and the hit to growth from the trade war with
China have dampened US prices.
Goods prices fell 0.6 percent compared to October 2018, while energy
prices dropped 4.2 percent, according to the report.
Services, however, which make up the biggest part of the US economy,
increased 2.2 percent.
The Fed has lowered overnight interest rates three times this year as
insurance against the risks of trade tensions, something it was able to do in
the absence of inflation. But the central bank worries that if prices
continue dropping it could create a vicious cycle of deflation which would
undermine confidence in the economy.
The report also showed that American personal income stagnated in October,
after a 0.3 percent gain in September
However, households continued to spend, as expenditures rose 0.3 percent.
BSS/AFP/HR/0945