Key Fed Inflation Metric Rises As Trump's Tariffs Loom

The Federal Reserve's key metric for tracking inflation went up in October, potentially tossing a wrench into the central bank's plans for rate cuts.

The personal consumption expenditures index increased 2.3% from a year ago, a faster pace than the 2.1% uptick in September, the Commerce Department reported Wednesday. The increase was in line with experts' consensus expectations.

The core index, which removes more volatile food and energy prices, rose 2.8% in October compared to 2023. That was up from 2.7% in September.

An uptick in inflation, coupled with the inflationary pressures President-elect Donald Trump's proposed tariffs on Mexico and Canada may exert, could increase construction costs, which the CRE community says are already too high, ABC News reported.

Trump said earlier this week he would charge the nation's closest neighbors a 25% tariff on all products coming into the U.S. until those countries take action to stem illegal immigration and the flow of drugs across the border.

Federal Reserve Chair Jerome Powell said at this month's Federal Reserve meeting that Trump's election victory won't influence the central bank's policy decisions in the near team.

“Here, we don't know what the timing and substance of any policy changes will be,” Powell said. “We therefore don't know what the effects on the economy would be specifically, whether and to what extent those policies would matter for the achievement of our goal variables of maximum employment and price stability.”

Earlier this month, the Fed cut rates by 25 basis points, leaving the target range for the federal funds rate between 4.5% and 4.75%. At the meeting, Powell reiterated the bank's plans to continue easing monetary policy through 2025.

After months of consistent progress from the Fed in bringing down inflation, the latest PCE reading is an early indicator that inflation remains sticky. However, the price increases remain orders of magnitude smaller than their peak in 2022.

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