Key Fed Inflation Measure Slowed To 2.2% In August, Lower Than Expected

The personal consumption expenditures (PCE) price index, a key inflation gauge used by the Federal Reserve, rose by 0.1% in August, bringing the 12-month inflation rate to 2.2% . This figure is down from 2.5% in July and is the lowest since February 2021, according to a report released by the Commerce Department on Friday. The inflation rate was lower than the 2.3% economists surveyed by Dow Jones had predicted.

Excluding food and energy, core PCE rose by 0.1% in August and was up 2.7% from a year ago, a 0.1 percentage point increase from July. Federal officials often focus more on the core PCE as it provides a better measure of long-term trends. The forecasts for core PCE were 0.2% and 2.7%, respectively.

“All quiet on the inflation front,” said Chris Larkin , managing director of trading and investing at E-Trade from Morgan Stanley, via CNBC . “Add today’s PCE Price Index to the list of economic data landing in a sweet spot. Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff."

However, the report also showed that personal income and spending numbers were lower than expected . Personal income increased by 0.2% on the month, while spending rose by 0.2%, both falling short of the estimated increases of 0.4% and 0.3%, respectively. The report comes a little over a week after the Federal Reserve reduced its benchmark overnight borrowing rate by half a percentage point to a target range of 4.75%-5%.