Fed’s preferred gauge showed core inflation at 3.0% in August, much lighter than expected — SkimNews
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Core PCE inflation rose 0.2% in August, putting the annual rate at 3.0% — below the 3.3% economists surveyed by Dow Jones had forecast.
- Headline PCE increased 0.3% month-over-month and 3.4% year-over-year, also lighter than the 3.7% consensus expected.
- The Bureau of Economic Analysis adjusted its methodology for measuring prices in legal services, software and computer accessories, and portfolio management as part of this report.
- NY Fed President John Williams said 'there is no need for urgency' after the September hike, though he still views another hike as potentially 'appropriate late this year.'
- Following the data and Williams's remarks, markets priced out an October rate hike and shifted expectations to December; stock futures rose and Treasury yields turned negative.
- Energy costs drove August's price gains — gasoline jumped 4.4%, transportation services rose 1.4%, and energy goods and services climbed 2.3%.
- Q2 GDP was revised sharply upward to 2.2% annualized (from a prior 1.5% estimate), with real final sales to private domestic purchasers — a metric Fed officials watch closely — rising 4.6%.
Why it matters: Both PCE measures remain well above the Fed's 2% target, but the cooler-than-expected August print combined with Williams's patience signal gives policymakers room to skip October. Traders responded immediately — Treasury yields fell and stock futures rallied — meaning the cost of borrowing just eased for the next month, though December remains a live meeting.
Ask SkimNews
