Fed's Preferred Inflation Gauge to Hit Markets on Wednesday

The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, will be released on Wednesday morning. Economists expect both headline and core PCE prices to have risen 0.3% from July. This would leave inflation substantially above the Fed's 2% target.

The report will be closely watched after the Fed raised interest rates earlier this month and signaled that additional tightening could be necessary before the end of the year. Most Fed policymakers expect at least one more rate hike in 2026, but New York Fed President John Williams has taken a more patient approach, saying another increase this year would be reasonable.

The PCE report will also provide insight into consumer spending, which economists expect to have jumped 0.8% in August after increasing just 0.2% in July. This resilience matters to the Fed because strong demand can make inflation more difficult to bring under control.