August PCE Price Index Report

(Reuters) – The personal consumption expenditures (PCE) price index rose 0.1% in August following an unrevised 0.2% gain in July, according to the Commerce Department's report on Friday. Economists had predicted a 0.1% increase in PCE inflation. Over the span of 12 months through August, the PCE price index increased 2.2%, down from 2.5% in July.

Core PCE Index

The core PCE price index, which excludes volatile food and energy components, also increased 0.1% after a 0.2% rise in July. In the same 12-month period through August, core inflation advanced 2.7%, compared to 2.6% in July. The U.S. central bank monitors the PCE price measures to meet its 2% inflation target.

Market Reaction

• Stocks: U.S. stock futures firmed 0.16%, indicating a steady open for Wall Street.
• Bonds: The U.S. Treasury 10-year yield eased to 3.762% while the two-year yield fell to 3.584%.
• Forex: The dollar index fell 0.4%.

Expert Comments

Quincy Crosby, Chief Global Strategist, LPL Financial

> "The August PCE report supports the Fed's decision to go big on September 18, although the core year-over-year at 2.7% indicates another round of 50 basis points needs scrutiny unless labor market weakness emerges. Overall inflation is moving decisively in the right direction."

Jamie Cox, Managing Partner, Harris Financial Group

> "Inflation is no longer a key story for the Fed. It’s about spending and maintaining economic strength. These data suggest a likely 50 basis points increase in November."

Brian Jacobsen, Chief Economist, Annex Wealth Management

> "Powell can breathe a bit easier. The personal income and spending data vindicates the decision to push for a larger cut. Personal interest income has dropped for two months and will likely continue to fall."

Peter Cardillo, Chief Market Economist, Spartan Capital Securities

> "These numbers confirm that inflation continues to decline. The 2.2% year-to-year headline indicates we're close to the Fed’s goal. However, personal income and spending were cooler than expected, showing signs of a slowing economy. This could lead to further rate cuts by year-end."