Wall Street’s major indexes rose on Wednesday after a new Commerce Department report revealed that US inflation came in below forecasts, strengthening market expectations that the Federal Reserve may delay its next interest rate increase.
The personal consumption expenditures (PCE) price index, a key gauge preferred by the Fed, registered at 3.4% annually in August, falling short of the 3.7% rate anticipated by economists surveyed by Reuters. The data provided a silver lining for traders who had been bracing for tighter monetary policy.
According to market indicators, traders now price in roughly a 35% chance of an October rate hike, a notable decline from the 45% probability observed following recent pressure from the White House. The improved economic data has effectively dampened immediate concerns about aggressive rate adjustments next month.
The White House pressure clearly didn’t move the needle. Fed independence seems intact this time.
Stocks rallying on this makes total sense. Lower rates always boost equity valuations.
Wait, does this mean mortgage rates will actually drop anytime soon, or is the Fed playing games?
Is 3.4% really ‘soft’ when essentials are still crushing families? Don’t celebrate just yet.
Finally, some good news for borrowers. The housing market might actually see relief soon.