PCE Index Revisions Fuel Debate Over Underlying Inflation
The Bureau of Economic Analysis reported that the personal consumer expenditure index came in lower for August, but the decrease was due to changes in the index's methodology.
The PCE index, considered a preferred measure of inflation by the Federal Reserve, showed an annualized rate of 3.4% for August, down 0.3% from July's 3.7% rate.
Excluding food and energy costs, the monthly inflation rate was 0.2%, with an annualized inflation rate of 3%.
The BEA revised its methodology in estimating certain hard-to-price services such as portfolio management, legal services, software, and investment advice, which likely contributed to the downward trend.
Federal Reserve Governor Christopher Waller stated that nonmarket services prices have been an issue due to imputed price changes rather than actual ones, suggesting that underlying inflation may be better than core numbers suggest.