The other big piece of this though, is PCE inflation came in at 4.2% for Q3. And Core PCE, excluding food and energy, the main measure the Fed actually uses for their target, was at 4.5%. That's down from 4.7% in Q2, and 5.6% in Q1.

So if core inflation continued to fall, even as unemployment remained 3.5% and real GDP grew at 2.6%, then maybe there's not a need to cause too much more pain.

And Personal Consumption Expenditures grew at a 5.7% annualized rate in the quarter. So if you are worried about inflation driven by excess consumption demand, well with 2.6% real GDP growth, that consumption growth would still be roughly consistent with only a 3.1% inflation (5.7-2.6) rate.

But overall, I don't think this alters the Fed's course any. These numbers are roughly consistent with their projections from the September meeting, so their median forecast for the Fed Funds rate peak of 4.6% in 2023 still seems applicable.

So yes, still more pain ahead. And no pivot. They'll likely still need to get to 4.2%-4.9% or so and then hold it there a couple of years. But if you got those rates to 4.5%, while that core PCE inflation rate fell to ~3%, that would also still only be a moderately contractionary policy.