Core PCE Hits 2.9%, Matching Forecasts and Boosting Cut Bets

U.S. Inflation data from August came in right on target, according to the Core Personal Consumption Expenditures (PCE) Price Index released today. 

Core personal consumption excluding food and energy costs rose by 0.2% month-over-month, totalling up to a 2.9% year-over-year rate. The report came in precisely as analysts had foreseen, and presents a slight cooldown when compared to July’s 0.3% monthly rise. 

Headline PCE, which includes all categories, climbed 0.3% on the month and 2.7% annually. Again, no surprises.

While Federal Reserve Chair Jerome Powell was careful in his tone during the last FOMC meeting, decreasing the certainty of subsequent rate cuts, today’s PCE print raises the odds of even lower borrowing costs on October 29. 

The Fed’s last move, a 25-basis-point cut in September, was its first rate cut of 2025. Chair Jerome Powell cited “gradual disinflation” and “resilient consumer demand” as key reasons. August’s spending data backs that up: personal income rose 0.4%, and spending jumped 0.5%, both above expectations.

The University of Michigan’s inflation expectations also got corrected downward today, adding weight to the narrative that inflationary pressures will not be as prominent as expected in the mid-term. 

Labor market data is also cooperating. Jobless claims came in lower than expected yesterday, suggesting that easing monetary policy hasn’t triggered a slowdown in hiring.

Today’s report comes at a time when riskier markets like crypto and stocks are in much need of relief. The combination of a stronger U.S. Dollar and uncertainty about future monetary policy raised risk-aversion among investors, leading Bitcoin to drop below $110k, and the S&P 500 to fall by over 1.6% over the past three days.