Federal Reserve's Preferred Inflation Measure Drops to Lowest Level Since March 2021

According to Yahoo News, the Federal Reserve's preferred measure of inflation, the personal consumption expenditures (PCE) price index, fell to a 3 percent annual increase in October, its lowest level in more than two-and-a-half years. This decrease takes pressure off the central bank to make another quarter-point rate hike before the year ends. Markets expect the Fed to hold rates steady at the next meeting of its rate-setting committee on December 12 and 13. The core PCE, which removes food and energy categories subject to geopolitical pressures, fell to a 3.5-percent annual increase in October, down from 3.7 percent in September and 3.8 percent in August. Both the core and headline PCE numbers are now below the Fed's expectations for the end of the year. The drop in price acceleration is also reflected in the Labor Department's consumer price index (CPI), which held steady in October for a 3.2 percent annual increase. The CPI showed food prices are 3.3 percent higher than a year ago, while energy prices are 4.5 percent lower. Despite the slowing pace of inflation, overall price levels are still significantly higher than before the pandemic, averaging a 20 percent increase since the beginning of 2020. This may have contributed to low approval ratings for President Biden's handling of the economy, despite a consistently strong labor market. Fed governor Christopher Waller expressed confidence in the current policy's ability to slow the economy and bring inflation back to 2 percent.