PCE Inflation 2.7% in August; Further Fed Cut Likely

The personal consumption expenditures (PCE) price index rose 2.7% year‑over‑year in August, with core PCE at 2.9%; on a monthly basis headline PCE increased 0.3% and core PCE 0.2%. The readings matched forecasts and, while still above the Fed’s 2% target, kept markets and many economists expecting another quarter‑point cut after last week’s move that set the policy rate at 4–4.25%. Policymakers are monitoring President Trump’s new tariffs, which officials and some economists say have produced largely one‑time price‑level increases that could temporarily lift inflation but might complicate the path back to 2% if effects spill over. Consumer spending accelerated in August and second‑quarter GDP grew a robust 3.8%, even as job growth has slowed, leaving the Fed to weigh price stability against a weakening labor market. Fed officials, including Chair Jerome Powell, said tariff effects may unfold over several quarters but left the door open for further easing ahead of the Oct. 28–29 policy meeting.