The Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred measure of inflation, was in line with economists' estimates for the month of October. Prices rose 0.2% month-over-month and 2.3% year-over-year, while core PCE, which excludes food and energy costs, was also in line with forecasts as prices rose 0.3% from the month prior and 2.8% annually.

Catalysts Hosts Seana Smith and Madison Mills sit down with S&P Global Ratings global chief economist Paul Gruenwald to take a closer look at the data and what it signals about the Fed's next move.

"The core PCE has been going sideways for the last couple of months. And if you think the Fed is on a declining rate path, which we do, that's probably leaning toward the pause camp. We know the target is 2%, and they're trying to get there gradually, but this underscores the message that the Fed knows policy is restrictive but they're not going to be in a hurry to cut rates unless they see a more convincing decline in the core PCE."

"The economy is still running a bit hot, so the result of that is we're going to have inflation higher than target. So the Fed's going to keep the foot on the brake and keep rates tighter for longer," he adds.

Gruenwald believes the Fed could likely react to President-elect Donald Trump's proposed tariff policies, calling them a "driving force" for possible fiscal policy.

"And again, the economy is in a pretty good spot right now, both from a cyclical position and relative to the rest of the world. So you don't really want to mess with that too muc ... I think we've got a lot of volatility ahead [and] I think that's kind of a given in the next four years," Gruenwald says.

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This post was written by Naomi Buchanan.