The core Personal Consumption Expenditures (PCE) index, which is the Federal Reserve’s preferred inflation gauge, increased by 0.1% in August, according to the Commerce Department’s report on Friday. This is below the expected 0.2% jump predicted by Wall Street analysts and signals a further inflation cooldown.
The all-items Personal Consumption Expenditures index jumped by 0.1% compared to July, marking a 2.2% increase on a year-over-year basis. It is down from a 2.5% year-over-year increase from the month prior and largely in line with analysts’ expectations, who forecasted a 0.1% monthly jump and a 12-month inflation rate of 2.3%.
The PCE index rate of 2.2% has been at its lowest since February 2021 but is still above the Fed’s target of 2%.
Core PCE, which excludes volatile food and energy prices and is more closely followed by the Fed, increased by 0.1% in August while being 2.7% up from a year ago. The analysts expected core PCE to jump by 0.2% and predicted a 2.7% year-over-year increase.
The experts are divided about what the PCE data will mean for the Fed’s borrowing policy. The Fed lowered its interest rate in September by 50 basis points and is expected to make another cut in November. While some believe another larger cut would be appropriate, others predict that the data is promising enough that the Fed feels comfortable going with a lower 25 basis points cut.