prices for pce rose more than expected in september and october and so did " core " pce inflation, which excludes more volatile food and energy prices and is a better guide to future inflation. three - month annualized core pce inflation has risen over the past two months, while six - month annualized inflation has made only a small improvement. these rates now stand at 2. 8 percent and 2. 3 percent, respectively. these recent readings have contributed to 12 - month core pce inflation of 2. 8 percent in october. if we compare components of core inflation this october with last october, we see 12month housing services inflation has softened and goods inflation has moved to slight deflation, but there has been an increase in nonmarket core services excluding housing. overall, i feel like an mma fighter who keeps getting inflation in a choke hold, waiting for it to tap out yet it keeps slipping out of my grasp at the last minute. but let me assure you that submission is inevitable - inflation isn't getting out of the octagon. while the recent increase and the level of inflation raise concerns that it may be getting stuck above the fomc's 2 percent goal, let me emphasize that this is a risk but not a certainty. i take the recent inflation data seriously, but we saw a similar uptick in inflation a year ago that was followed by a continued decline, so i also don't want to overreact. and i expect housing services inflation to continue to moderate and i do not take much signal from the elevated inflation for other non - market services. now let me turn to the implications for monetary policy based on my assessment of the underlying economic outlook. while some near - term aspects of the outlook may be a little unclear, something that is clear is the direction for monetary policy and our policy rate over the medium term, which is down. this downward trajectory reflects the fact that the level of aggregate demand in the economy, relative to supply, has moderated significantly over the past year - it is plainly visible in the data on spending and the labor market. inflation over that time is also significantly lower, so it makes sense to be moving policy rates toward a more neutral setting. and there is a ways to go. in september, the median of the projections of fomc participants was that the federal funds rate would be 3. 4 percent at the end of next year, which is about 100 basis points lower than it is today.

or skip. as of today, i am leaning toward continuing the work we have started in returning monetary policy to a more neutral setting. policy is still restrictive enough that an additional cut at our next meeting will not dramatically change the stance of monetary policy and allow ample scope to later slow the pace of rate cuts, if needed, to maintain progress toward our inflation target. that said, if the data we receive between today and the next meeting surprise in a way that suggests our forecasts of slowing inflation and a moderating but still - solid economy are wrong, then i will be supportive of holding the policy rate constant. i will be watching the incoming data closely over the next couple weeks to help me make my decision as to what path to take. 1 the views expressed here are my own and are not necessarily those of my colleagues on the federal open market committee. 2 a similar story holds true if one looks at growth in labor productivity and hourly compensation from the productivity and cost release. here the wedge between the two series has narrowed over this time period. 4 / 4 bis - central bankers'speeches