US Core PCE Inflation Accelerates To 2.9% In August Amid Rising Consumer Spending

The Federal Reserve's favored inflation gauge, the Personal Consumption Expenditures (PCE) price index, showed a slight acceleration in August 2025, rising 2.7% year-over-year, up from 2.6% in July, marking the highest increase since February. Core PCE inflation, which excludes food and energy, remained steady at a 2.9% increase year-over-year, consistent with forecasts. Consumer spending rose 0.4% from July, driven mainly by increased spending on goods, while spending on services like travel and dining grew modestly. Despite the overall inflation easing from previous peaks, inflation in services, particularly rents and other non-housing services, accelerated, reaching levels above the pre-pandemic range and contributing significantly to the inflation pressure. Federal Reserve officials have noted these inflation trends amid ongoing economic concerns, including potential impacts from tariffs and a looming government shutdown. The data highlight persistent inflation challenges, especially in the service sector, even as the Fed cautiously adjusts interest rates to balance inflation control with economic growth.