Softer PCE reading cools Fed rate-hike expectations
Softer-than-expected US inflation and a stronger GDP revision altered market expectations and trading on Wednesday. The commerce department's PCE price index rose 3.4% year on year in August, below a 3.7% Reuters estimate, while second-quarter GDP was revised up to a 2.2% annualised rate thanks to consumer spending and AI-related investment. The data cut market odds of a 25 basis point Federal Reserve hike in October to about 37% and pushed two-year and longer Treasury yields higher, pressuring the Dow even as the Nasdaq and megacap tech names advanced. Private payrolls rose 90,000 in September, ahead of Friday's government report.
Market odds for an October 25bp Fed hike fell to about 37%
Context
Inflation cooled when the August PCE came in below forecasts. The Fed raised rates by 25…
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