US Inflation Eases to 0.3% as Fed Cuts Rate Hike Odds

US inflation rose less than expected in August, according to data released by the Commerce Department. The Personal Consumption Expenditures (PCE) Price Index increased 0.3% in August after a downwardly revised 0.1% gain in July.

The moderation in inflation gives the Federal Reserve breathing space, reducing the urgency for an October interest rate hike. However, underlying inflation remains elevated, and core PCE inflation was at 3% year-on-year in August.

Despite record diesel prices, consumer spending surged 0.9% in August, supporting economic resilience. The data also shows that households are tapping into their savings and setting aside less money for a rainy day.