26. September 2025
Admin
Fed’s Favorite Inflation Measure Remains Elevated in August 2025
According to the latest data, consumer prices measured by the **Personal Consumption Expenditures (PCE) index** rose 2.7% year-over-year in August, up from 2.6% in July. Core PCE (which excludes food and energy) also held steady at 2.9%.
Quick Insight: Inflation remains above the Fed’s 2% target, complicating expectations around interest rate cuts and monetary policy direction.
1. Key Inflation Figures
• **Overall PCE inflation:** 2.7% year-over-year (up from 2.6%).
• **Core PCE inflation:** 2.9%, unchanged from July.
• These readings are closely watched because PCE is the Federal Reserve’s preferred inflation gauge.
2. Implications for Fed Policy
• The elevated inflation figures suggest the Fed may proceed cautiously with rate cuts.
• Many analysts still expect a rate cut in October, but persistent inflation could delay further action.
• The inflation trend underscores the challenge the Fed faces balancing price stability and economic growth.
3. Effects on Consumers & Economy
• Prices for everyday goods continue to rise faster than desired for many households.
• Despite inflation, consumer income and spending increased in August, offering some relief.
• Lower-income households feel more of the inflationary pressure, while wealthier households benefit more from rising asset values.
Final Thoughts
The August PCE report shows inflation is stubbornly high, making the Fed’s path to interest rate cuts more complex. As policymakers weigh the data, markets and consumers alike will be watching closely for clarity on when and how much easing might come.
Tip: If you're investing or borrowing, track core inflation and Fed statements — they usually offer important hints about future rate changes.
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