Dow Jones Soars as Fed’s Preferred Inflation Gauge Nails Target - Markets Cheer
Wall Street erupts in bullish frenzy as the Federal Reserve's key inflation metric lands perfectly on forecast.
Market Mechanics Unpacked
Traders dumped caution as the PCE index delivered exactly what policymakers wanted to see. The Dow Jones Industrial Average ripped higher on the news, with financial institutions scrambling to reposition portfolios.
Institutional Reaction
Bank analysts immediately upgraded quarter-end projections while maintaining cautious optimism about sustained momentum. The precise inflation reading gives the Fed exactly what it needs to maintain current policy trajectories without surprising markets.
Behind the Numbers
Market veterans noted the rare alignment between forecast and reality - a phenomenon that typically triggers algorithmic buying sprees across trading floors. The timing couldn't be better for quarterly rebalancing operations.
Of course, Wall Street will find something to panic about tomorrow - they've got bonuses to justify, after all.
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August’s Personal Consumption Expenditures (PCE) index notched a monthly rise of 0.3%, in line with the consensus estimate. It ROSE by 2.7% year-over-year, the highest since February and also in line with the estimate. PCE, which is the Fed’s preferred gauge of inflation, measures the prices of a wide range of goods and services purchased by U.S. households.
Core PCE Matches Estimate as Rate Cut Odds Rise
Core PCE, which excludes volatile food and energy items, increased by 0.2% month-over-month and 2.9% year-over-year. Both figures matched their estimates.
With inflation showing no surprises, the odds of a rate cut at the October 28-29 Federal Open Market Committee (FOMC) meeting have inched higher to 87.7% compared to 85.5% yesterday, according to CME’s FedWatch tool. Last week, the Fed voted 11-1 to cut rates by 25 bps, with Fed Governor Stephen Miran dissenting in favor of a 50 bps reduction.
