PCE Index Falls Below Expectations Amid Methodology Changes

The Federal Reserve's preferred measure of inflation, the PCE index, came in lower for August at an annualized rate of 3.4%, down from July's 3.7%.

This decrease was largely due to changes in the way the Bureau of Economic Analysis estimates nonmarket costs such as fees charged for financial services and insurance products.

Federal Reserve Gov. Christopher Waller noted that these costs have been a point of contention, as they are imputed rather than actual price changes.

Despite this revised methodology, the PCE index remains above the Federal Reserve's 2% inflation target, with an annualized inflation rate of 3%, excluding food and energy costs.