Underlying inflation pressures decrease compared to September
The Federal Reserve Bank of New York released a new report on Monday, stating that the underlying inflation pressures impacting US consumers have eased in October compared to the previous month. According to the report, the multivariate core trend (MCT) inflation reading for October was 2.6%, slightly lower than September’s reading of 2.88%. The report attributes the higher level of MCT to sector-specific trends in housing and services ex-housing.
New York Fed’s MCT index measures inflation persistence
The New York Fed’s MCT index aims to measure the persistence of inflation and the broad changes in inflationary pressures on consumer prices. In June 2022, the MCT index reached its peak at 5.44%. The October reading closely aligns with the six-month trend of the personal consumption expenditures index, which stood at a 2.5% rise in October. The personal consumption expenditures index is the Federal Reserve’s preferred inflation gauge.
Fed officials assess economic data ahead of final policy meeting
The release of this report comes as central bank officials review economic data in preparation for the Federal Reserve’s final policy meeting of the year, scheduled for December 12-13. During this meeting, officials will consider the possibility of another interest rate hike or a continued pause in rates.
Fed seeks “soft landing” for US economy amid inflationary cycle
The Federal Reserve has been aiming for a “soft landing” for the US economy since the acceleration of the current inflationary cycle in 2022. In June 2022, inflation reached a 40-year high of 9.1% before gradually declining to 3.2% in October 2023. However, this level remains above the Fed’s target of 2%.
Fed aggressively raised interest rates to combat inflation
To combat inflation, the Federal Reserve raised interest rates aggressively through the benchmark federal funds rate. In 16 months, rates increased 11 times, going from near zero to above 5%. This tightening of monetary policy is the fastest the Fed has implemented since the 1980s. Raising interest rates typically slows economic activity and impacts the labor market, but so far, both have avoided significant declines.
Fed Chairman Powell emphasizes progress but highlights need for continued inflation control
Federal Reserve Chairman Jerome Powell stated on Friday that the economy is “better balanced” and that progress has been made. However, he emphasized the importance of continued progress in lowering inflation to reach the Fed’s 2% objective.
FOMC members divided on further interest rate hikes
Members of the Federal Open Market Committee (FOMC), responsible for setting monetary policy, will assess whether inflation and economic activity warrant another rate hike or if signs of slowing support a continued pause. New York Fed President John Williams believes the target range of the federal funds rate has reached its peak. However, FOMC members Michelle Bowman and Christopher Waller hold differing views on the need for more rate hikes.
FOX Business’ Megan Henney and Reuters contributed to this report.
