Fed’s favored inflation gauge edges up in August as rate-cut bets persist
PCE inflation rises to 2.7% year over year; core PCE unchanged at 2.9%; markets expect another cut at the October meeting after last week’s rate reduction.
The Federal Reserve's favored inflation measure rose 2.7% in August from a year earlier, the Commerce Department said Friday, a tick higher than July's 2.6% pace and the strongest reading since February. Excluding food and energy, core PCE rose 2.9% in August from a year earlier, the same as in July.
The data come as the Fed cut rates last week for the first time this year, trimming the benchmark to a range of 4.0% to 4.25%. Markets and economists say another quarter-point cut could come at the Fed's October meeting if inflation remains broadly on track to slow. "Although it is still firmly above the Federal Reserve's 2% target, we believe the central bank remains on track to cut interest rates again at its next meeting in October," Clark Bellin, president and chief investment officer at Bellwether Wealth, said in a note Friday.
Separately, the Labor Department reported the consumer price index rose 2.9% in August, underscoring that inflation remains above the Fed's target but showing signs of gradual easing from earlier in the year.
Taken together, the latest data suggest inflation is on a slower path, keeping the Fed in a position to calibrate its policy stance as it weighs the pace of additional rate cuts against the risk of renewed price pressures.