Inflation gauges in the US at 2-year lows may spur rate hike pause

Inflation gauges in the US and euro zone are set to show the smallest annual increases since early or mid-2021, reinforcing sentiment that interest rates won’t be raised again.
 

The Federal Reserve’s preferred measures will be published on Thursday, with the personal consumption expenditures price index seen rising 3.1 per cent in October from a year ago. The core measure, which excludes food and fuel and is considered a better gauge of underlying inflation, is expected to have climbed 3.5 per cent.
 

Euro-region data for November, also due on Thursday, will probably show inflation at 2.7 per cent, the lowest since July 2021. The underlying measure is seen slowing to 3.9 per cent.
 

Despite the disinflation progress, officials on both sides of the Atlantic insist they want to see more evidence to be sure that consumer prices are durably under control.

On Friday, European Central Bank President Christine Lagarde said that “we’re certainly not declaring victory.” Fed officials are united around a strategy of being deliberate about the path for policy. Minutes of their last meeting showed that they took note of how higher rates were starting to squeeze households and businesses.

The Fed on Wednesday will issue its Beige Book of economic conditions and anecdotes from across the country. The US personal income and spending report is also forecast to show only a slight advance in inflation-adjusted consumer outlays.

The October downshift in demand help explain forecasts for a slowdown in the economy after a third-quarter growth spurt The government issues its first revision to third-quarter gross domestic product  on Wednesday, the median forecast in a Bloomberg survey calls for 5 per cent growth. Initial estimate of corporate profits are also expected. 
 

Further north, Canada will release third-quarter GDP data that will reveal whether it entered a recession, though economists reckon on at least minimal growth. Jobs numbers for November will be the last major data point before the Bank of Canada’s rate decision on December 6. Elsewhere, the Paris-based OECD presents a new set of forecasts, Lagarde speaks to European lawmakers, and central banks from New Zealand to South Korea are expected to keep rates on hold.