The latest personal income and spending report released by the Bureau of Economic Analysis on Friday (September 29) showed that the core personal consumption expenditure (PCE), the Fed's favorite, rose in line with expectations.
Specifically, the U.S. PCE price index climbed 3.5% in August from a year earlier; Month-on-month growth was 0.4 per cent, against expectations of 0.5 per cent.
Excluding volatile food and energy components, the core PCE rose 3.9% in August, compared with 3.9% expected, and the previous value was 4.20%, which was the first time below 4% in nearly two years. On a month-on-month basis, it rose 0.1 per cent, below the 0.2 per cent forecast and 0.20 per cent previously, the smallest monthly increase since November 2020.
Inflation in August was driven mainly by higher energy and food prices. Energy prices rose 6.1 per cent month-on-month in August. Food prices rose 0.2 per cent from a month earlier and 3.1 per cent from a year earlier.
In addition, the second quarter core PCE price index annualized rate of 3.7% final, expected 3.70%, 3.70% previously.
The Fed has set an inflation target of 2 percent as a sign of healthy economic growth. The last time core PCE was at this target level was in February 2021.
The Fed has been aggressively raising rates since March 2022. It put rates on hold at its September meeting to weigh the impact of 12 consecutive hikes. The Fed has raised interest rates by 5.25 percentage points.
Since the meeting, several Fed officials have said they expect rates to remain high for an extended period of time; There are also officials who believe there will be another rate hike before the end of the year.
Friday's good data report reinforced expectations that the Federal Reserve will pause. Core PCE slowed down compared to expectations of flat growth last month.
Following the release of the latest PCE, U.S. stock index futures extended previous gains.
As of 8:32 am ET, the Dow Jones Industrial average was up 0.53%; The S&P 500 was up 0.62%; The Nasdaq 100 was up 0.87 percent.