WASHINGTON– In data released late last week, the Federal Reserve’s preferred inflation gauge showed inflation remained elevated in August, even as the Fed has cut the federal funds rate by 25 basis points as it seeks to balance the need to restore price stability against a weakening labor market.
The Commerce Department on Friday reported that the personal consumption expenditures index rose 0.3% in August from a month earlier and is up 2.7% from last year.
According to the data, core PCE, which excludes volatile measurements of food and energy prices, was up 0.2% on a monthly basis and 2.9% year-over-year. Both were in line with economists’ expectations.
“Federal Reserve policymakers are focusing on the PCE headline figure as they try to bring inflation back to their long-run target of 2%, though they view core data as a better indicator of inflation,” noted Fox Business in its analysis. “Headline PCE ticked higher from 2.6% in July to 2.7% in August, while core PCE held steady at 2.9% over that period.”
Additional Data Points
The data also revealed:
• Prices for goods were up 0.9% in August from a year ago, an acceleration from the 0.6% readings in both June and July.
• Durable goods prices were 1.2% higher in August compared with last year, while nondurable goods rose 1.2% in that period.
• Services prices were up 3.6% in August compared with a year ago, slightly higher than the 3.5% reading in July.
• The personal savings rate as a percentage of disposable personal income was 4.6% in August, down slightly from 4.8% in the prior month.
Fed Chair Statement
“We have begun to see goods prices showing through into higher inflation and actually, the increase in goods prices accounts for most of the increase in inflation or perhaps all of the increase in inflation over the course of this year,” Fed Chairman Jerome Powell stated. “Those are not very large effects at this point, and we do expect them to continue to build over the course of this year and into next year.”
