The Federal Reserve’s preferred inflation measure continued its moderation in August and personal spending missed expectations, helping bolster bets on a second consecutive oversized rate cut at the central bank’s November meeting. Data released by the Bureau of Economic Analysis this morning showed the core personal consumption expenditures index rising 0.1 percent from the prior month, undershooting market forecasts for a 0.2 percent increase. On a year-over-year basis, core price growth rose to 2.7 percent, aligning with economist estimates as base effects shifted comparisons.

The overall personal consumption expenditures index also rose 0.1 percent relative to the prior month, and was up 2.2 percent from a year ago, missing the 2.3-percent consensus estimate. Personal income rose 0.2 percent month-over-month, and inflation-adjusted household spending climbed just 0.2 percent, with both missing forecasts that had been set at 0.4 percent and 0.3 percent, respectively. The savings rate, which can offer a preview of future spending capacity, fell to 4.8 percent from 4.9 percent, continuing its decline from year-ago levels as more consumers tapped borrowing products to support spending.

Front-end Treasury yields are slumping and the dollar is retreating as market participants double down on bets that the Fed will deliver another 50 basis-point rate cut in November. Equity futures are bouncing higher on hopes that the economy will cool – but not freeze – in the coming months.

Separately, the Canadian economy expanded slightly more than forecast in July, but a flat estimate for August helped keep expectations for the Bank of Canada’s easing cycle largely unchanged. Numbers released by Statistics Canada this morning showed real gross domestic product growing 0.2-percent on a month-over-month basis in July, slightly topping market expectations – and the agency’s own preliminary estimate – for a 0.1-percent gain.

An early estimate showed real gross domestic product flatlining in August, with declines in manufacturing, transportation, and warehousing sectors offsetting energy extraction and public sector growth.

The Canadian dollar is rising after experiencing a knee-jerk sell-off in the seconds after the data was released, but gains look primarily driven by developments in US rates markets.

Three quarter-point rate cuts are still priced in for the Bank of Canada by year end – implying at least one jumbo-sized move in the two policy meetings remaining – but with important jobs and inflation numbers yet to drop before the October decision, a 50 basis-point move can’t be considered a lock at this point. It’s important to remember that Canada started cutting from a lower threshold, has delivered more than the Fed to date, and already has significant easing priced in over the next year.