Investing.com -- An inflation metric closely monitored by the Federal Reserve climbed higher in the year to October, potentially offering a reason for the central bank to pause its rate-cutting cycle next month.
The personal consumption expenditures price index accelerated to a 2.3% annual increase during the month, from a reading of 2.1% in September. The figure was in line with economists' estimates.
On a monthly basis, the index grew 0.2%, at the same pace as in September.
Meanwhile, the so-called "core" metric, which strips out more volatile items like food and fuel, came in at 2.8% annually, ahead of September’s 2.7%. Month-on-month, it grew 0.3%, unchanged from the previous month, in line with expectations.
The figures come as Fed officials contemplate their next policy decision after they moved to cut borrowing costs by a quarter of a point earlier this month, bringing the target range for the federal funds rate to 4.50-4.75%.
The central bank had started cutting interest rates in September, with an outsized reduction of 50 basis points, the first reduction in borrowing costs since 2020.
The market is split on the likelihood of another cut in December, as the November consumer price index showed inflation at 2.6%, above the Fed's stated 2% target level.
"The 0.3% month-on-month [core] reading may still be a little too high for the Fed's liking," said analysts at ING, in a note, "although such a number is fully discounted today. That means the market probably retains its pricing of 15bp worth of Fed cuts in December and also keeps US rate differentials versus the Rest of the World at reasonably wide levels."
Separately on Thursday, weekly claims for first-time unemployment benefits dipped to 213,000 from a revised lower 215,000 in the prior week, with claims steadily retreating from the near 1-1/2-year high seen in early October, which was the result of hurricanes and strikes at Boeing (NYSE:BA).
Additionally, the US economy grew at a solid clip in the third quarter, as gross domestic product increased at an unrevised 2.8% annualized rate, the Commerce Department's Bureau of Economic Analysis said in its second estimate of third-quarter GDP.
The economy grew at a 3.0% pace in the April-June quarter, and is expanding at a pace that is well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8%.