Fed's Preferred Inflation Gauge Shows Lower Than Expected Increase in August
On September 30, the Federal Reserve’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) Price Index—showed a lower-than-expected increase of 0.3% for August on a seasonally adjusted basis and rose 3.4% year over year. Economists had anticipated higher figures at 0.3% monthly and 3.7% annually. Core PCE, which excludes volatile food and energy prices, also came in below expectations with an increase of 0.2% for the month and 3% on a yearly basis. Despite these softer readings, bond yields remained elevated due to recent changes in how the Bureau of Economic Analysis calculates certain components like portfolio management fees and legal services. Analysts estimate this change reduced core PCE by up to 0.3%. Additionally, rising fuel prices in September have made August data less indicative of current inflation trends. While some market participants view the report as positive for easing rate hike concerns, geopolitical tensions with Iran continue to pressure oil prices and keep investors cautious about future inflation.
Topics: bond yields economic indicators Federal Reserve inflation