US Inflation Eases, Reducing Odds of October Rate Hike

US inflation rose less than expected in August, which may lead financial markets to reduce the likelihood of another interest rate hike by the Federal Reserve next month.

The Commerce Department's Bureau of Economic Analysis reported that economists had forecast a 0.4% increase in the PCE price index after a previous gain of 0.2% in July. Instead, inflation rose 0.2%, bringing the year-on-year core PCE inflation rate to 3.0%.

The Fed raised bank borrowing costs to the 3.75%-4.00 range earlier this month, marking its first rate hike in three years. New York Fed President John Williams' comments on Tuesday also reduced the odds of an October rate hike, with financial markets pricing in a roughly 51.5% chance of further policy restrictions next month.