US PCE Inflation Comes in Below Expectations, Easing October Fed Hike Bets

US PCE inflation rose 3.4% in August, below expectations, while core PCE increased 3.0%, easing expectations

U.S. inflation rose less than economists expected in August, Personal Expenditures (PCE) price index increasing 3.4% year over year, below the 3.7% forecast, according to data shared by Coin Bureau.

Core PCE inflation, which excludes food and energy prices, rose 3.0% year over year, also below the 3.3% expected. The latest figures indicate softer price pressures than anticipated, while revisions to the previous month's data further lowered the reported inflation rate.

The PCE price index is closely watched by the Federal Reserve in assessing inflation trends and monetary policy.

July Inflation Readings Revised Lower

The July headline and core PCE readings were both revised down by 30 basis points, according to the figures cited by Coin Bureau.

The revisions add to the softer picture presented by the August report. Before the latest data, the Bureau of Economic Analysis had reported July headline PCE inflation at 3.7% and core PCE inflation at 3.3% year over year.

The August release was scheduled by the BEA for Sept. 30, alongside its monthly Personal Income and Outlays report. The PCE measure covers changes in the prices of goods and services purchased by consumers in the United States.

October Rate-Hike Expectations Ease

The cooler-than-expected inflation figures have reduced market expectations for another Federal Reserve rate increase in October. Reuters reported that the softer PCE reading prompted markets to further reduce the likelihood of an October hike.

The CME FedWatch Tool showed the probability of an October rate increase falling to 37% after the data, down from 45% before the release, according to Reuters.

The shift reflects the immediate response of financial markets to the inflation report, rather than a change in the Federal Reserve's policy guidance. Inflation remains above the central bank's 2% target, leaving the path for monetary policy dependent on subsequent economic data and policymakers' assessments.

Stocks and Crypto React to Rate Expectations

Coin Bureau characterized the softer inflation figures as generally supportive for stocks and cryptocurrencies, arguing that lower expectations for interest rates can improve liquidity conditions and risk appetite.

That market interpretation is not the same as a guaranteed outcome for asset prices. The immediate reaction to the PCE report has also been visible in other financial markets. Reuters reported that gold prices rose after the data as the weaker inflation reading reduced expectations for further Federal Reserve rate increases.

For markets, the next question is whether the cooler August inflation data represents a sustained moderation in price pressures or a single monthly reading. The Federal Reserve's upcoming policy decisions will continue to depend on incoming economic information, with the next monthly PCE report scheduled for Oct. 29.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.