US inflation rose less than expected in August, giving financial markets reason to further reduce bets that the Federal Reserve will raise interest rates again next month.
The numbers
The Personal Consumption Expenditures price index — the Fed's preferred inflation gauge — rose 0.3 percent last month, the Commerce Department's Bureau of Economic Analysis said on Wednesday. Economists polled by Reuters had forecast a 0.4 percent rise. Over the 12 months through August, PCE inflation advanced 2.6 percent, down from a downwardly revised 3.4 percent in July.
A methodology change is behind much of the revision: the BEA altered how it calculates prices for software and accessories, portfolio management fees and legal services, and revised inflation data going back to 2021. July's annual figure had previously been reported as 3.7 percent.
Core PCE, which strips out volatile food and energy prices, climbed 0.2 percent on the month and 3.0 percent year-on-year — also softer than initially estimated. The Fed targets 2 percent inflation.
Rate-hike odds fade
The report follows New York Fed President John Williams' comment on Tuesday that he saw "no urgency" for further action. Together, they pushed the market-implied odds of an October rate hike down to around 35-52 percent from as high as 70 percent earlier in the week, according to LSEG and CME FedWatch data.
The 10-year Treasury yield fell to 5.203 percent from 5.234 percent on the data before bouncing back, while the two-year declined. Bond yields also fell in Europe, with Germany's 10-year Bund sliding 5 basis points to 3.563 percent. Wall Street edged higher: the Dow rose 74.9 points to 51,424.84, the S&P 500 gained 0.24 percent and the Nasdaq added 0.36 percent.
Consumer spending, which accounts for more than two-thirds of US economic activity, surged 0.9 percent in August — even as a Conference Board survey showed consumer confidence falling to a near 12-1/2-year low in September.
Sources:
- US inflation rises less than expected in August; consumer spending surges (Reuters)
- Global Bond Yields Fall on Mild U.S. Inflation (WSJ)
The numbers
The Personal Consumption Expenditures price index — the Fed's preferred inflation gauge — rose 0.3 percent last month, the Commerce Department's Bureau of Economic Analysis said on Wednesday. Economists polled by Reuters had forecast a 0.4 percent rise. Over the 12 months through August, PCE inflation advanced 2.6 percent, down from a downwardly revised 3.4 percent in July.
A methodology change is behind much of the revision: the BEA altered how it calculates prices for software and accessories, portfolio management fees and legal services, and revised inflation data going back to 2021. July's annual figure had previously been reported as 3.7 percent.
Core PCE, which strips out volatile food and energy prices, climbed 0.2 percent on the month and 3.0 percent year-on-year — also softer than initially estimated. The Fed targets 2 percent inflation.
Rate-hike odds fade
The report follows New York Fed President John Williams' comment on Tuesday that he saw "no urgency" for further action. Together, they pushed the market-implied odds of an October rate hike down to around 35-52 percent from as high as 70 percent earlier in the week, according to LSEG and CME FedWatch data.
The 10-year Treasury yield fell to 5.203 percent from 5.234 percent on the data before bouncing back, while the two-year declined. Bond yields also fell in Europe, with Germany's 10-year Bund sliding 5 basis points to 3.563 percent. Wall Street edged higher: the Dow rose 74.9 points to 51,424.84, the S&P 500 gained 0.24 percent and the Nasdaq added 0.36 percent.
Consumer spending, which accounts for more than two-thirds of US economic activity, surged 0.9 percent in August — even as a Conference Board survey showed consumer confidence falling to a near 12-1/2-year low in September.
Sources:
- US inflation rises less than expected in August; consumer spending surges (Reuters)
- Global Bond Yields Fall on Mild U.S. Inflation (WSJ)
