The Federal Reserve’s preferred inflation gauge (core PCE) came in at 3% year-over-year, below the 3.3% expected, on September 30. The Bureau of Economic Analysis (BEA) modified its calculation method the same day, notably changing how it measures portfolio management fees, which previously tracked a stock market-correlated index. RBC economists estimate these changes lowered the index by approximately 0.18 percentage points, including 0.16 points for software alone. Bitcoin rallied above $84,000 and markets slashed the probability of an October rate hike from over 70% to around 35%, yet core PCE remains at 3%, one full percentage point above the Fed’s target.
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