US stock indexes moved higher on Wednesday after fresh data showed inflation cooled last month, according to Reuters. The report said the softer reading eased investor concerns that the Federal Reserve would need to raise interest rates again.
Reuters reported that US inflation rose less than expected in August, while consumer spending surged. The Fed's preferred inflation measure reached 3%, a level that reduced the urgency for another rate hike, according to Realtor.com.
CNBC reported that Dow futures gained 100 points following the inflation data. The Wall Street Journal said the Nasdaq jumped after the GDP and PCE figures pointed to strength in the US economy.
The numbers put two forces side by side: price growth that is slowing and consumer demand that remains firm. For markets, that combination lowered the perceived likelihood of further tightening by the Fed, which has been weighing how long to keep rates elevated.
The inflation gauge in focus is the personal consumption expenditures index, the measure the central bank watches most closely when setting policy. A reading at 3% still sits above the Fed's longer-run target, though the direction of the latest data gave traders reason to buy.
Investors will now watch for further Fed commentary and the next round of economic releases to see whether the cooling trend in prices continues.
