US Inflation Holds Above Target as Economy Expands

The US personal consumption expenditures price index (PCE) increased by 0.3% in August, slightly less than expected. The annual rate rose to 3.4%, still above the Federal Reserve's target of 2%. Core PCE inflation, which excludes volatile food and energy prices, also came in below forecasts at 3%, with a monthly increase of 0.2%.

The data suggests that price pressures may be moderating, although they remain significantly above the Fed's target. Energy prices were a major contributor to the increase, rising 4.4%. Transportation services increased by 1.4%, and energy goods and services overall climbed 2.3% during the month.

Despite elevated borrowing costs and inflation, consumers continued to spend, with personal income increasing by 0.2% in August and consumer spending rising by 0.9%. This shows that household demand remains strong, a major driver of US economic activity. The economy grew at a 2.2% annualized pace between April and June.