The annual core Personal Consumption and Expenditures index, the Federal Reserve’s preferred measure of inflation, rose 0.1% annually and 1.8% monthly in October, slightly short of the expected readings in both cases.
Key Takeaways
- Personal income increased $84.9 billion in October, or 0.5%.
- Disposable personal income (DPI) saw an increase of $81.7 billion or 0.5% while personal consumption expenditures rose $86.9 billion or 0.6%.
- Personal saving in October was $967.8 billion, while the personal saving rate was 6.2%.
- The PCE price index rose by 0.1% excluding food and energy, or 0.2% overall.
The rate of US inflation is a crucial factor in economic growth at the best of times, and even more closely watched with the upcoming G20 summit meeting on Friday and Saturday where the ongoing trade war will be discussed by world leaders among other issues.
The US dollar underwent a brief slump before recovering during European trading hours, and the summit is credited with the dollar buyback as investors exercise caution before the meeting, with some traders pointing out that there is still a large gap in interest rates between the USD and other currencies which favors the USD.
Expert Outlook
Many took to social media to lament the difficulty the Fed seems to be having in controlling the rate of inflation, but the recent statements made by the central bank’s chairman Jerome Powell regarding the near-neutral rate of inflation are nevertheless viewed as positive for those who wish to see a more reserved rate hike policy in 2019, something that would benefit the housing market and other sectors.
David Kohl, chief currency strategist at Julius Bar, stated that the US rate of interest for currency traders still favored the USD, saying:
“At the end of the day it (the U.S. dollar) still has a sizable interest rate advantage.”
Market Reaction
Gold is currently trading at $1,225.79/oz at the time of writing with a 0.36% increase on the day. With gold typically having an inverse relationship with the value of the US dollar it’s possible that the greenback action is slightly reducing the gains seen earlier in the day.
Gold Price Chart
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