Core PCE Slows to 3.0%, Putting an October Hike in Doubt
The Fed's preferred inflation gauge came in below forecasts. August core PCE rose 3.0% from a year earlier, against a 3.3% consensus and 3.3% in July. The monthly gain was 0.2%, versus 0.3% expected.
Headline PCE also undershot, at 3.4% against a 3.7% forecast. Spending was strong: consumer outlays rose 0.9% in August, the fastest pace in a year.
The data landed on hike pricing that was already fading. New York Fed President John Williams said on Tuesday, "there is no need for urgency." Odds of an October hike stood near 70% on Monday and fell to about 45% before the release.
Today's number reinforces that retreat. A hike is no longer the base case; it is an open question.
Bonds reacted in measured fashion. The 10-year yield eased to 5.22% from Tuesday's 5.25% close. The dollar index slipped about 0.3%.
That is a 3-basis-point pullback. Yields remain near their highest levels since 2007.
The second premarket story is in defense. The Pentagon picked Boeing for the Navy's next-generation F/A-XX fighter, a contract worth more than $20B. Boeing is up about 3% premarket, while losing bidder Northrop Grumman is down 3.7%.
