US PCE inflation rose 3.4% year over year in August, below the 3.7% forecast. Core PCE, the Federal Reserve’s preferred inflation gauge, increased 3.0%, compared with expectations for 3.3%.
Why it matters
Both readings came in below expectations, a sign that inflation was cooler than anticipated. The core figure is closely watched by the Fed as it assesses price pressures.
Market impact
A softer inflation reading can support expectations for lower interest rates and a more favorable backdrop for risk assets. The figures alone do not determine the Fed’s next move, but they add a data point investors will weigh in assessing its policy outlook.
Frequently asked questions
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What was US PCE inflation in August?
PCE inflation rose 3.4% year over year, below the 3.7% forecast.
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How did core PCE compare with expectations?
Core PCE increased 3.0% year over year, versus expectations for 3.3%.
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Why is core PCE important to the Federal Reserve?
Core PCE is the Fed’s preferred inflation gauge and is closely watched as it assesses price pressures.
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What could cooler-than-expected PCE mean for interest-rate expectations?
The softer readings can support expectations for lower interest rates, but the data alone does not determine the Fed’s next move.
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Why are investors watching the August PCE figures?
The figures were below forecasts and provide a data point investors can weigh when assessing inflation and the Fed’s policy outlook.
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