US inflation data showed mixed signals in August, with the overall Personal Consumption Expenditures (PCE) price index rising 0.3% month-on-month and 3.4% year-on-year. The 0.3% monthly rise in overall PCE inflation was below economists’ expectations. In July, the overall PCE measure had increased 0.1% from the previous month.
On a yearly basis, overall PCE inflation remained at 3.4% in August, unchanged from July. The core PCE measure, which excludes food and energy prices, rose 0.2% month-on-month in August. The measure had increased 0.1% in July.
The reading was also below expectations.
Economists had expected core PCE inflation to rise 0.3% in August, meaning the actual monthly increase was lower than expected. On a yearly basis, core PCE inflation stood at 3.0% in August, matching July’s 3.0% reading. The central bank has a 2% year-on-year inflation target. The latest inflation report comes as markets and policymakers are debating whether the Fed will need to raise interest rates again before the end of 2026.
The latest figures therefore show that inflation is still above the Federal Reserve’s 2% target, but some parts of the data were weaker than expected.
Expectations for an October rate hike have moderated following Williams’ comments, according to the report. Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the data was mixed and suggested that the Fed was probably right to raise rates earlier this month. Zaccarelli also said that if inflation improves further, the Fed could potentially skip a meeting or avoid raising rates three times in a row, which had been a concern among some observers.
The figure was also cooler than economists had projected. The Federal Reserve closely watches the PCE inflation measures when deciding where to set interest rates.
The Fed raised interest rates earlier in September as it tried to control inflation that has been driven in part by higher energy costs.
