Sep 27, 2024 - Business

Fed's go-to measure confirms slowing inflation

Courtenay Brown

Person seen shopping outside of stores in Atlanta — A shopper outside a shopping mall in Atlanta earlier this month. Photo: Elijah Nouvelage/Bloomberg via Getty Images

The Federal Reserve's favorite inflation gauge showed mild price increases for yet another month as incomes held steady and consumers pulled back on spending, the government said on Friday.

Why it matters: Inflation kept receding in August, confirming the trend that convinced the central bank to lower interest rates earlier this month. Other details of the report suggest a cooling — though not collapsing — economy.

By the numbers: The Personal Consumption Expenditures (PCE) index rose just 0.1% in August. The core measure that strips out food and energy prices rose by the same amount. That's a slower pace than the index's 0.2% increase the prior month.

Compared to the same period a year ago, the PCE index rose 2.2% in August.
By this measure, core PCE rose 2.7% versus the 2.6% in July.

The big picture: Inflation is approaching the Fed's 2% target, allowing the central bank to pivot its focus to the job market that lost steam in recent months.

The report showed that disposal income increased 0.2%, the same amount as July. Factoring in inflation, disposal income rose 0.1% for the third straight month.
Consumers kept spending but at a more measured pace: Consumer expenditures rose 0.2%, pulling back from the 0.5% increase in July.

Go deeper: What's next after the Fed's big rate cut

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Fed's go-to measure confirms slowing inflation

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