Monday, October 31, 2016

Federal Reserve's Main Inflation Gauge Is Benign, Which Is Bullish For Stock Market

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*The PCE Price Index, the Fed's main inflation gauge, slowed ex-food and energy.
*The Fed has less reason to worry about inflation ahead of the upcoming FOMC decision on Wednesday.
*This number could help shape their post FOMC decision commentary to soften wording around timing of the next rate increase.



PCE Price Index is the Fed's main inflation gauge. It slowed from last month when removing the volatile components of food and energy. The annual run-rate continues to also be below their target. While the Fed has talked, of late, about letting the economy run hot, inflation is not hot which subdues pressure to raise Fed Funds rates. The more push out we have of rate hikes, the better stock markets (SPYIWM) can do.
PCE Reported This Morning.
PCE Month to MonthJanFebMarAprMayJunJulAugSept
PCE price index yoy0.1-0.10.10.30.20.100.20.2
Core PCE0.30.10.10.20.20.10.10.20.1

Above you see the month-to-month trends hold or slow. Topline PCE remained the same but the Core PCE Price Index slowed to .1% month-to-month. These are benign results.
Let's look at the Fed's all-important annual run rate.
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