Instant view: US PCE inflation cools in November

(Reuters) -The personal consumption expenditures (PCE) price index rose a less-than-expected 0.1% in November, marking a cooler inflation picture than October's unrevised 0.2% gain, and, combined with solid but disappointing consumer spending, supported markets struggling with the Federal Reserve's "hawkish' rate cut this week.

The Commerce Department also reported on Friday that in the year through November, the PCE price index advanced 2.4% after rising 2.3% in October. The increase in the annual inflation rate was partly due to last year's low readings dropping out of the calculation.

Excluding the volatile food and energy components, the PCE price index climbed 0.1%, after an unrevised 0.3% gain in October. In the 12 months through November, the so-called core inflation increased 2.8% after advancing by the same margin in October.

MARKET REACTION:

STOCKS: The S&P 500 pared losses to -0.51%, still pointing to a weak open on Wall Street

BONDS: U.S. Treasury 10-year yields fell to 4.506% and the two-year yield fell to 4.259%

FOREX: The dollar index extended lower show a loss of 0.42%

COMMENTS:

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, NORTHLIGHT ASSET MANAGEMENT, CHARLOTTE, NORTH CAROLINA (by email)

"The market woke up in a terrible mood – an unexpected government shutdown and a more-hawkish-than-expected Fed are to blame – but this morning’s inflation data came in lower-than-expected and took some of the edge off."

"We expect the market will continue to sell off into the weekend, but we will be watching the last 15 minutes of trading today to see how we finish. If the selling builds throughout the day and there is momentum (to the downside) heading into the weekend then that would be a bad sign for next week, however, if we see some dip-buying later today and the market finishes significantly higher than the lows of the day would suggest, then that would make us more optimistic for next week."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

"Powell must be getting tired of the data undermining things he says. Lower inflation than expected and slower spending growth don’t corroborate the Fed’s sudden tilt towards hawkishness. The jump in auto sales isn’t likely going to be a massive driver of growth over the next year. Consumers aren’t shelling out more on everyday spending items. The Fed will likely change its tune once again sometime soon."

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“All the macro data this morning was cooler than expected. This is good news for markets, but it doesn’t change the path for the Fed.”

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