Core PCE, the Fed’s preferred inflation gauge excluding food and energy, rose 0.2% m/m in September, matching both expectations and August’s pace. On a year-over-year basis, core PCE printed 2.8%, in line with consensus and a touch below August’s 2.9%.

Key points

  • 0.2% m/m and 2.8% y/y—consistent with the disinflation trend.
  • Limited policy impact this time: the report was delayed by the government shutdown and is now three months old.
  • Fed focus likely to shift toward real-time indicators and forward-looking trends.

Why it matters

Core PCE usually carries significant weight in the Fed’s reaction function. With this print lagging, policymakers will emphasize more timely signals such as labor market momentum, services inflation ex‑shelter, and survey-based indicators.

Policy outlook

We expect the Fed to maintain a patient stance as disinflation progresses. The threshold for renewed tightening remains high; data dependence and communication around services and shelter will be key.

Investment implications

  • Rates: Front-end yields biased lower as disinflation firms; curve volatility persists.
  • Equities: Favor quality and cash-flow resilience with slower nominal growth.
  • Credit: Prefer IG over HY given restrictive financing for lower-quality issuers.