U.S. August PCE inflation rises 3.4%, below forecasts, easing pressure for an October rate hike

[Financial News] The August increase in the U.S. personal consumption expenditures (PCE) price index came in below market expectations.
Because the Federal Reserve System (Fed) closely monitors this indicator when setting monetary policy, market expectations have grown that the Fed is less likely to raise interest rates again in October.
The United States Department of Commerce said on the 30th of last month, local time, that the August PCE price index rose 3.4% from a year earlier.
That was below the 3.7% forecast compiled by Dow Jones.
Month on month, it rose 0.3%, in line with expectations.
The core PCE price index, which excludes energy and food, rose 3.0% year on year and 0.2% month on month in August.
Dow Jones had forecast year-on-year and month-on-month increases of 3.3% and 0.3%, respectively.
Both headline and core PCE inflation remain well above the Fed's 2% target. However, the core measure, which shows underlying inflation trends, came in lower than expected, prompting assessments that price pressures were not as strong as feared.
Following the release, the policy-sensitive two-year U.S. Treasury yield fell 4 basis points to around 4.84% in the New York bond market. The 10-year yield also declined.
The probability of another Fed rate hike in October, as priced into the interest-rate futures market, was also revised.
Interest-rate futures put the probability of an October rate hike at about 37%.
David Russell, head of global market strategy at TradeStation, called the data "good news for investors who have been concerned about the recent surge in bond yields," adding that it "strengthens the case for not raising rates in October."
However, vigilance over future inflation data is expected to continue because this report is based on lagging data that does not reflect the recent surge in diesel prices.
Moreover, as the overall price level remains high, expectations persist that the Fed will raise rates again at one of the remaining Federal Open Market Committee (FOMC) meetings this year.
By category, prices of goods and services each rose 0.3% from the previous month.
Energy prices, in particular, drove the increase in August inflation.
Gasoline prices jumped 4.4% month on month, while prices of energy goods and services rose 2.3%. Transportation services prices also increased 1.4%.
The PCE price index is an inflation measure that reflects the prices of goods and services consumed by households.
The Fed uses it as a benchmark when assessing whether it has achieved its monetary policy goal of 2% inflation.
[email protected] Lee Seok-woo, international affairs specialist Reporter