Fed Unfazed by Soft Inflation Reading: Rates Hikes Continue

The recent inflation reading of 3.4% for August may have come in under forecasts, but it's unlikely to sway the Federal Reserve from hiking interest rates again.

The Federal Reserve's preferred gauge, PCE, rose 0.2% on the month, bringing the annual rate down to 3%. While some investors might see this as a sign for the Fed to stand down, experts disagree.

Kevin Warsh made it clear at Jackson Hole that the 2% target is firm and fixed, and the Fed judges trends over isolated data points. Six-month PCE inflation was running above 4% annualised when he spoke, making this month's reading just one cooler month measured on new methods.

Energy remains a significant concern, with diesel now costing more than $6.50 a gallon, up around 75% in a year. Fuel prices feed into almost everything, from food to shipping costs, which take months to filter through.