Fed's Favored Inflation Gauge Cools but Remains Elevated at 3.4%

The Federal Reserve's preferred inflation gauge cooled more than expected in August but remained elevated well above target. The Commerce Department reported that the personal consumption expenditures (PCE) index rose 0.3% on a monthly basis and was up 3.4% from a year ago, both figures cooler than economists' expectations of 0.4% and 3.7%, respectively.

Core PCE, which excludes volatile measurements of food and energy prices, was up 0.2% on a monthly basis and 3% year over year, also lower than expected. The Fed focuses on the PCE headline figure as they try to bring inflation back to their long-run target of 2%, though they view core data as a better indicator.

Goods prices were up 2.7% from a year ago after rising 0.3% in August, while services prices were 2.5% higher than last year after an increase of 0.3% in August. The personal savings rate as a percentage of disposable personal income was 4.1% in August, down from 4.6% in July.

Experts are mixed on the implications of this data. Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said that inflation is 'a little closer to target than in the prior release, but that is because of how inflation is measured, not how it's trending.' Bret Kenwell, eToro U.S. investment analyst, noted that the cooler-than-expected inflation report will likely be a relief for Wall Street.