PCE Report Could Spark Another Rate Hike as October Meeting Looms

The upcoming US Core PCE report is expected to have a significant impact on expectations for the Federal Reserve's next monetary policy move. The report, scheduled for release on Wednesday, is projected to show a 0.3% month-over-month increase in core personal consumption expenditures (PCE) for August, up from 0.2% in July.

This would leave the annual rate around 3.3% to 3.4%, with headline PCE expected to rise roughly 0.4% to 0.5% on the month. A 0.4% core reading would be difficult for the Fed to dismiss, particularly after its September rate hike, and could strengthen the case for another move at the October 27-28 meeting.

The details of the report may matter even more than usual due to changes in methodology that could lower previously reported core inflation. Economists expect personal income to rise around 0.5%, while spending forecasts are clustered around 0.8% to 0.9%. A strong spending print would suggest households remain resilient despite higher rates, potentially making the Fed less comfortable assuming inflation will cool on its own.