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Investing.com - Underlying U.S. inflation in August matched the prior month’s pace as anticipated, in a sign of sticky price pressures that Federal Reserve officials have flagged as a key influence on the trajectory for interest rates over the rest of the year.
The so-called "core" personal consumption expenditures price index, which strips out volatile items like food and fuel, rose by 2.9% in the twelve months through August, the same as in July and in line with economists’ estimates, according to data from the Commerce Department’s Bureau of Economic Analysis on Friday.
Month-on-month, the measure came in at 0.2%, also equaling both July’s figure and Wall Street projections.
On a headline basis, PCE stood at 2.7% year-over-year and 0.3% month-over-month. The gauges accelerated slightly from July and were the same as forecasts had predicted.
The Fed, which tracks the PCE for its long-run 2% annual inflation target, recently highlighted a need to balance stubbornly elevated price gains with worries over a cooling labor market when rolling out future rate decisions.
Earlier this month, the central bank slashed borrowing costs by 25 basis points and signaled that more reductions could be coming at its final two meetings of 2025 in October and December. But Fed Chair Jerome Powell said this week that there is no "risk-free" option for rates facing policymakers.
Cutting rates can, in theory, help spur investment and hiring, albeit at the risk of fueling inflation.
"Room for rate cuts? Seems like it’s open to interpretation. Inflation leveling off near 3% is well above target, but some will argue it’s close enough," wrote Kathy Jones, Chief Fixed Income Strategists at Charles Schwab, in a post on X.
Meanwhile, data from the Commerce Department also showed that U.S. consumer spending, which accounts for a significant portion of overall economic activity, increased by 0.6%, compared to 0.5% in July. The numbers, which came after an upward revision to second-quarter gross domestic product and decrease in weekly jobless claims on Thursday, were a fresh indication of broader resilience in the world’s largest economy.