PCE Inflation Rises Below Expectations as Fed Hike Odds Diminish

US inflation rose less than expected in August, according to the Commerce Department's Bureau of Economic Analysis. The Personal Consumption Expenditures Price Index (PCE) increased by 0.3% last month after a downwardly revised 0.1% gain in July. This is lower than the 0.4% increase forecasted by economists polled by Reuters.

The PCE inflation rate for the 12 months through August was 2.6%, down from the previously reported 3.7%. The BEA changed its methodology for calculating prices for software and accessories, portfolio management fees, and legal services in the PCE price index. It also revised the inflation data going back to 2021.

Excluding food and energy components, core PCE inflation was 0.2% over the month after a downwardly revised 0.1% rise in July. The core PCE inflation rate for the year through August was 3.0%, matching the previous estimate.

The US central bank tracks the PCE price measures for its 2% inflation target. With this data, the odds of another interest rate increase from the Federal Reserve next month have been diminished. New York Fed President John Williams stated that he saw 'no urgency' for further action.