The Federal Reserve's "favorite" inflation gauge continues to cool down, is it expected to cut interest rates by another 50 basis points in November?

According to the Zhitong Finance and Economics APP, the measure of potential inflation favored by the Federal Reserve only rose slightly in August, highlighting a cooling economy and paving the way for further interest rate cuts by the Fed in the future.

Data released by the U.S. Bureau of Economic Analysis on Friday showed that the core PCE price index, which excludes volatile food and energy items, rose by 0.1% in August, the smallest increase in three months and below the market expectation of 0.2%. On an annual basis, the core PCE rose by 2.7%, in line with market expectations and higher than July's 2.6%.

Overall PCE rose by 0.1% from July and by 2.2% from the same period last year, marking the lowest level since February 2021. Market expectations were for increases of 0.1% and 2.3% respectively.

Adjusted for inflation, spending only increased by 0.1%. Nominal personal income rose by 0.2%, while the savings rate fell to 4.8%.

Following the data release, U.S. Treasury yields and the dollar fell as the market expected these data to prompt the Fed to continue cutting interest rates in the coming months, intensifying the ongoing debate over the extent of rate cuts.

After the Fed's decision earlier this month to cut rates by a significant 50 basis points to kick off its easing cycle, futures data show that investors are divided on whether similar measures will be taken in November or if a smaller rate cut will be chosen. Rate futures traders believe that the likelihood of a 50 basis point rate cut by the Fed in November is slightly higher than a 25 basis point cut.

Currently, Fed officials have shifted their focus from combating inflation to emphasizing support for the job market, which has shown some signs of weakness. At last week's meeting, policymakers indicated the possibility of cutting rates by another 50 basis points this year and then by 100 basis points by 2025, although the market expects more aggressive measures.

Prior to this report, the U.S. Bureau of Economic Analysis released annual revisions to Gross Domestic Product (GDP) data on Thursday. The data showed faster economic growth, increased savings, and higher incomes compared to previous reports up to 2022 and 2023 Details of August inflation data show a general economic cooling. Service prices excluding housing and energy rose by 0.2% for the second consecutive month. Goods prices, excluding food and energy, fell by 0.2%, marking the largest decline in three months.

The increase in spending was driven by an increase in service spending. Overall service spending grew by 0.2% after a 0.1% increase, while goods spending remained unchanged after steady growth last month.

Despite the largest wage increase since May, disposable income growth slowed due to declines in owner income, interest income, and dividend income