The Federal Reserve's preferred inflation measure showed core prices rising 3.0% in August, well below the 3.3% that economists had forecast, according to CNBC.
Key facts
- Core PCE inflation came in at 3.0% in August.
- Economists had projected a 3.3% core reading, per the Dow Jones consensus.
- Headline PCE had been forecast at a 3.7% annual gain.
- The PCE price index is the Fed's preferred inflation gauge.
The Federal Reserve’s preferred measure of inflation came in lighter than expected in August, according to CNBC. Core inflation, which strips out volatile food and energy prices, registered an annual gain of 3.0%.
That figure was below the 3.3% that economists had anticipated for the core reading, based on the Dow Jones consensus cited by CNBC. The softer result suggests price pressures may have eased more than forecasters projected.
On the headline measure, the personal consumption expenditures (PCE) price index had been projected to show an annual gain of 3.7%, according to the Dow Jones consensus referenced by CNBC.
The PCE price index is closely watched because it is the inflation gauge the Federal Reserve prefers when assessing price trends across the economy. The index measures changes in the prices of goods and services purchased by consumers.
A core reading coming in below expectations is generally read by markets as a sign that underlying inflation is cooling, though the source material does not detail the market or policy reaction to the August data.
Why it matters
Inflation data like the PCE index directly informs the Federal Reserve's decisions on interest rates, which affect borrowing costs for households and businesses. A cooler-than-expected core reading can shift expectations about the direction of monetary policy.
Frequently asked questions
What is the PCE price index?
The personal consumption expenditures price index is the Federal Reserve's preferred gauge of inflation, measuring price changes for goods and services purchased by consumers.
What was core inflation in August?
Core PCE inflation came in at 3.0% in August, according to CNBC, below the 3.3% economists had expected.
What had economists forecast?
According to the Dow Jones consensus cited by CNBC, headline PCE was projected to rise 3.7% annually and core was projected at 3.3%.