Traders faced an unwelcome Halloween threat on Thursday as the Federal Reserve's favored inflation measure accelerated, raising some concerns on the likelihood of back-to-back interest rate cuts going into the final two monetary policy meetings of the year.

The PCE price index rose 2.1% year-over-year, in line with analyst forecasts. Yet the core PCE index - which strips out volatile food and energy prices and gives a better indication of underlying price pressures - rose 2.7%, slightly above the expected 2.6%.

The latter stronger-than-expected inflation figure could keep the Fed on alert as it weighs its next policy moves. While a 25-basis-point rate cut at next week's Fed meeting is widely seen as a done deal as per the CME FedWatch tool, market expectations for another cut in December could face some setbacks.

Personal Income And Outlays Report For September: Key Highlights

  • The PCE price index rose 0.2% month-over-month in September, matching the predicted 0.2% and accelerating from the previous 0.1%.
  • The core PCE price index rose 0.3% from the previous month, accelerating from 0.1% and matching estimates.
  • On an annual basis, the headline PCE price index surged 2.1%, down from August's upwardly revised 2.3%.
  • The core PCE price index held at 2.7% year-over-year, as in August.
  • Personal income increased by $71.6 billion, or 0.3%, in September, matching expectations of 0.3% and above the previous month's 0.2% growth.
  • Personal saving rate eased from 4.8% to 4.6%, with personal savings down from $1.05 trillion to $1 trillion in September.
  • Personal spending increased by $105.8 billion, or 0.5%, surpassing estimates of 0.4% and accelerating from the previous 0.2%.
Market Reactions

Markets showed minimal reaction to the latest PCE inflation report, with the U.S. dollar index (DXY)-tracked by the Invesco DB USD Index Bullish Fund ETF (UUP  )-largely maintaining its morning losses of 0.2%.

Treasury yields were steady, with the 2-year yield, sensitive to rate changes, holding at 4.17%.

As of 8:50 a.m. in New York, S&P 500 futures were down 0.6%, while Nasdaq 100 contracts also dipped by 0.6%. Yet, both held broadly steady after the inflation data release.

On Wednesday, the SPDR S&P 500 ETF Trust (SPY  ) fell 0.3%, ending a two-day winning streak.