A report released on December 4 by the Federal Reserve Bank of New York highlighted a decrease in underlying inflation pressures in the United States during October compared to the previous month.
The Multivariate Core Trend (MCT) inflation gauge, disclosed by the bank, indicated a reading of 2.6 percent for October, down from September’s 2.88 percent. The bank attributed the higher MCT level, compared to its pre-pandemic average, to specific trends in housing and non-housing services.
This update coincides with the imminent final policy meeting of the year for Federal Reserve officials. Broad expectations suggest that they are likely to maintain the overnight interest rate target within the range of 5.25-5.5 percent.
Indications from various quarters suggest that the current rate target set by the central bank seems to be at its peak. Several Fed officials have conveyed in recent weeks that with inflation pressures significantly lower than their pandemic peak, they have the flexibility to assess new data before deciding on any adjustments to interest rates.
Federal Reserve Chairman Jerome Powell, speaking on December 1, noted that the economy is now “better balanced” and expressed satisfaction with the trajectory of economic development, stating, “We are getting what we want.”
New York Fed leader John Williams, in an address on November 30, remarked, “Based on what I know now, my assessment is that we are at, or near, the peak level of the target range of the federal funds rate.”
The NY Fed MCT reading aligns with a broader trend of declining price pressures. The index reached its peak in June 2022 at 5.44 percent. October’s figure also closely mirrored the six-month trend of the personal consumption expenditures price index, registering a 2.5 percent increase in October.
Powell, in his statement, acknowledged the recent lower inflation readings as positive, emphasizing the need for this progress to continue to reach the targeted 2 percent.
Williams anticipates the Fed closing in on its inflation target by 2025. Official updates on their inflation outlook are expected at the Federal Open Market Committee (FOMC) meeting scheduled for December 12-13.