HomeFinancial MarketsFed's Preferred Inflation Measures Shows Slowest Rise in Two Years

Fed’s Preferred Inflation Measures Shows Slowest Rise in Two Years

Government data showed that August’s Personal Consumption Expenditures (PCE) Index grew by 3.5% year over year; its slowest rate since September 2021. On a monthly basis, August’s PCE edged 0.1% higher; down from July’s 0.2% growth.

Core PCE, which excludes volatile food and energy categories, rose 3.9% on a monthly basis, down from July’s 4.1% rise and fall in line with expectations of economists surveyed by Bloomberg. Given that PCE is the Federal Reserve’s preferred measure of inflation, these cooling figures are good news given that they could give the Fed reason to ease its tight fiscal policy.

Interest rates are currently in the range of 5.25% to 5.5%; their highest level since March 2001. After Fed Chair Jerome Powell noted last Wednesday that inflation is still “well above our longer-run goal of 2%,” observers have braced themselves to face the Fed’s promise of keeping interest rates higher for longer.

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