The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, showed a slight slowdown in August. The index rose 2.2% year-over-year, coming in below analyst expectations of 2.3%. This marks a decrease from July’s 2.5% rise.
While the overall inflation rate eased, core inflation, which excludes volatile food and energy prices, remained steady. The core PCE index increased by 2.7% year-over-year, matching forecasts and slightly higher than July’s 2.6%. This suggests that price pressures may be easing, but they are not entirely gone.
The decline in overall inflation can be attributed to several factors. Falling energy prices, particularly for gasoline, provided some relief compared to previous periods of stronger inflationary impact. Goods prices also experienced a slight decline, helping to offset the rising cost of services.
However, rising costs in services continue to be a major driver of inflation. Housing, financial services, and insurance costs have been particularly significant contributors to the overall increase in the PCE index. While goods prices saw a minor decline, rising service costs kept core inflation elevated.
The PCE report sparked positive premarket trading for several stocks, including Bristol-Myers Squibb, PPD Holdings, JD.com, Equinor ASA, Anheuser-Busch InBev, NetEase, Nu Holdings, Tesla, Alibaba Group Holding, BP, PayPal Holdings, General Motors, Lennar Corporation, and Micron Technology.
The Fed closely monitors the PCE index to gauge inflation trends and guide monetary policy decisions. The slowdown in overall inflation, even with steady core inflation, provides some reassurance that price pressures may be easing, but it remains to be seen how long this trend will continue.
