The US Personal Consumption Expenditures (PCE) price index rose 3.4% in August compared with the same month a year earlier, according to Reuters. The report also corrected earlier figures suggesting a slowdown to 2.6%, stating that figure was erroneous. The core PCE index, which strips out volatile food and energy prices, was flat.
The data drew attention because it came alongside a change in estimation methodology, which pushed the growth reading lower, according to Nikkei. Despite higher crude oil prices, the August inflation figure came in below expectations, Jiji Press reported.
Market reaction focused on the core measure's downward surprise. Bloomberg, cited by Yahoo! News Japan, reported that the probability of a US rate hike in October fell back to 36% following the softer core reading. Investors had been watching the PCE data closely for signals on the path of monetary policy.
The PCE price index is a key inflation gauge for the Federal Reserve. The mixed picture — a 3.4% headline increase but a flat core — left market participants assessing whether price pressures are easing. Currency and equity traders were also monitoring US economic indicators and interest rate trends, with the August PCE among the data points in focus, according to Gaitame.com.
What to watch next: further Fed commentary and upcoming US economic data for clearer direction on whether a rate move remains in play.
