Dow, S&P 500, Nasdaq futures sell off as government shutdown looms, Fed’s preferred inflation gauge on deck

Investors this morning will closely be monitoring a key inflation report set to shape future monetary policy.

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The Federal Reserve’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, which strips out volatile food and energy costs, is expected to have risen 0.2% month over month in November after prices rose 0.3% in October, according to Bloomberg data.

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Over the prior year, Wall Street expects core prices to rise 2.9%, ahead of the 2.8% gain seen in October.

Overall PCE is expected to increase 2.5% year over year, an acceleration from October’s 2.3% annual increase.

The report, which will be released at 8:30 a.m. ET, comes after the central bank slashed interest rates by 25 basis points at its last policy meeting of the year on Wednesday. Officials also signaled less easing to come in 2025 with inflation expected to remain elevated over the longterm.

Earlier this month, the core Consumer Price Index (CPI), which strips out the more volatile costs of food and gas, saw prices in November climb 3.3% over last year for the fourth consecutive month.

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Meanwhile, the core Producer Price Index (PPI), which tracks the price changes companies see, revealed prices increased by 3.4% annually in November. That’s up from a 3.1% jump in October and also ahead of economist expectations of a 3.2% increase.

In a press conference following Wednesday’s interest rate decision, Federal Reserve Chair Jerome Powell indicated that the last mile of the Fed’s fight to curb inflation has been more challenging than central bank leaders initially projected.

“We’ve had a year-end projection for inflation, and it’s kind of fallen apart as we approach the end of the year,” Powell said. “I can tell you that might be the single biggest factor — inflation has once again underperformed relative to expectations.”