US Inflation Rises Less Than Expected, Easing Pressure for October Rate Hike

The US inflation rate rose less than expected in August, according to data from the Commerce Department's Bureau of Economic Analysis. The Personal Consumption Expenditures Price Index (PCE) increased by 0.3% in August, following a downwardly revised 0.1% gain in July. Economists surveyed by Reuters had predicted a 0.4% rise in inflation.

The year-over-year PCE inflation rate reached 2.6% in August, down from the previously reported 3.4% in July. The core PCE Price Index, which excludes volatile food and energy components, rose 0.2% month-over-month in August after a downwardly revised 0.1% increase in July.

The Federal Reserve monitors the PCE price measures as part of its 2% inflation target. The Fed raised its benchmark overnight interest rate this month to a range of 3.75% to 4.00%, marking the first rate hike in three years, and indicated additional increases in borrowing costs could come in the months ahead.

Expectations for an October rate hike were reduced following comments from New York Fed President John Williams, who stated he saw no urgency for further action. Financial markets had previously priced in approximately a 51.5% chance of additional policy tightening the next month.