Core PCE Was Slightly Higher Than Expected, Nonfarm Payrolls Looms

Swap rates close little changed after release of inflation data. Rates fell 1-3bps today despite a 0.1% upside surprise to core annual PCE. Most PCE readings met forecasts, which quelled concerns about greater inflation acceleration. Markets are now looking ahead to tomorrow’s labor data, where nonfarm payrolls growth is expected to slow dramatically to 100k jobs added in October vs. 254k in September. The unemployment rate is expected to remain flat at 4.1%. 

PCE generally meets forecasts. Today’s personal consumption expenditures (PCE) data showed that inflation was 0.1% higher than expected on a core, annual basis (flat at 2.7% versus 2.6% forecasts). Month-over-month core PCE and both headline prints were as expected, with the former at 0.3% versus 0.2% in August. Headline year-over-year PCE was revised higher to 0.2% in August and was 0.4% in September.

BOJ holds rates steady, signals that additional rate hikes could be forthcoming. The BOJ held policy rates steady at 0.25% last night, their second consecutive pause after most recently hiking rates in July. Following the announcement, BOJ Governor Ueda suggested that the central bank will continue to raise interest rates; he stated, “Our basic stance is that if our economic and price outlooks are realized, we’ll respond by raising rates.” The yen strengthened after the comments, now up to 152 per dollar after recent lows of nearly 154 per dollar.