PCE Inflation Data Brings Uncertainty to Federal Reserve's Next Move

The Bureau of Economic Analysis has released data on personal consumption expenditures (PCE) price index for August, which is the Federal Reserve's preferred measure of inflation. The PCE inflation rate was 0.3 percent in August and 3.4 percent year over year. Core inflation, excluding food and energy prices, was 0.2 percent in August and 3.0 percent year over year.

The data suggests that the Federal Reserve may not raise interest rates at its October meeting as some had expected. Politico reported that 'a key gauge of inflation rose less than expected' which decreases the odds of a rate hike before the midterm elections.

However, Eakinomics argues that core inflation remains stubbornly stuck around 3 percent and has been since 2024. If the Fed is serious about its 2-percent target, it should consider raising interest rates to tighten financial conditions.