Fed’s preferred gauge showed core inflation at 3.0% in August, much lighter than expected
- On Wednesday, the Commerce Department's Bureau of Economic Analysis reported August PCE inflation rose 0.3% month-over-month and 3.4% year-over-year, while core PCE climbed 0.2% and 3.0%, both undershooting economist expectations of 0.3% and 3.3%.
- The BEA implemented revised methodology retroactively to early 2021 for measuring legal services, software, portfolio management fees, and computer accessories, reducing prior inflation readings. Computer software inflation fell from 21.2% to 12.3% year-over-year in July under the new approach.
- Americans accelerated spending 0.9% in August from 0.1% in July, with real consumer spending rising 0.6% after inflation adjustment, while the personal saving rate dropped to 4.1% as households tapped savings to maintain consumption.
- Financial markets rallied as investors scaled back rate-hike bets, with the probability of a 25-basis-point increase falling from 70% on Monday to 37% following the report, easing pressure on Treasury yields.
- Core PCE remains substantially above the Federal Reserve's 2% target at 3.0%, leaving policymakers with limited evidence that price pressures are easing. Fed Governor Michael Barr said Tuesday the combination of tariffs and the prolonged war with Iran has meant "we have been knocked off course on our progress toward our 2% goal.
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127 Articles
US Inflation Rises 3.4% in August as Consumer Spending Jumps 0.9%: BEA
Get latest articles and stories on Business at LatestLY. US inflation, measured by the Personal Consumption Expenditures (PCE) price index, rose 3.4 per cent in August from the same month a year ago, while consumer spending increased 0.9 per cent during the month, according to the latest estimates released by the US Bureau of Economic Analysis (BEA). Business News | US Inflation Rises 3.4% in August as Consumer Spending Jumps 0.9%: BEA.
US inflation rises below expectations in August; consumer spending robust
WASHINGTON — U.S. inflation increased less than expected in August and price pressures were more moderate in the prior month than previously reported, likely reducing the urgency for the Federal Reserve to raise interest rates again in October. Another rate hike this year, however, remains on the table as the report from the Commerce Department on Wednesday showed consumer spending surging last month. The economy so far appears to be holding up …
The PCE stood at 3.4% in August and with an underlying inflation of 3%, giving strength to the Fed's 'doves' who no longer want interest increases in the immediate. Revisions in the index methodology also led to a low update of the July reading.
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