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US Inflation Cools to 3.4% in August, Spending Jumps 0.9%: What it Means for Fed Rates
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Firstpost•01-10-2026, 07:22
US Inflation Cools to 3.4% in August, Spending Jumps 0.9%: What it Means for Fed Rates
- •US inflation, as measured by the PCE price index, rose 3.4% year-on-year in August, unchanged from July and below the 3.7% expected by economists.
- •Core PCE inflation, excluding volatile food and energy prices, increased 3.0% from a year earlier, matching the revised July rate.
- •Consumer spending surged 0.9% in August, indicating resilient demand despite moderating inflation, with personal income rising 0.2%.
- •The combination of softer inflation and strong spending presents a mixed picture for the Federal Reserve's interest rate decisions.
- •Financial markets reduced expectations for an October rate hike, though inflation remains above the Fed's 2% target and strong consumer spending could keep prices elevated.
Key Questions Answered
On a year-on-year basis, the Personal Consumption Expenditures price index rose 3.4 per cent in August, which was unchanged from the revised July rate and lower than the 3.7 per cent expected by economists.
Consumer spending surged 0.9 per cent in August following a downwardly revised 0.1 per cent increase in July, while adjusted for inflation, consumer spending increased by 0.6 per cent.
Following the inflation and spending data, financial markets reduced their expectations for an October rate hike, with the probability of an increase at the Fed's October 27-28 meeting dropping to around 41.5 per cent from 51.5 per cent.
