The Federal Reserve’s preferred inflation gauge remained stubbornly high in August – but not enough to dash hopes for an interest rate cut at next month’s meeting.
Personal consumption expenditures inflation rose 2.7% in August over the past 12 months, heating up from 2.6% in July as expected, the Bureau of Economic Analysis said Friday.
Core PCE – which excludes volatile food and energy prices – remained stuck at 2.9%, the same rate as the month before, according to the report.
The fresh inflation data comes just a week after the Fed slashed interest rates by a quarter point to 4 to 4.25%, its first cut since December 2024. Markets have been betting on a consecutive quarter-point cut at the Fed’s October meeting.
“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, since it’s clear that inflation is stable enough to handle lower interest rates,” Clark Bellin, president and chief investment officer at Bellwether Wealth, said in a note Friday.
Consumer inflation also heated up in August to 2.9%, according to the Bureau of Labor Statistics’ Consumer Price Index.
