Fed's inflation measure drops to 2.2% in August

In August, the personal consumption expenditures (PCE) price index rose by 0.1% from the previous month, resulting in an annual increase of 2.2%. This figure is significant as it is closely monitored by the Federal Reserve, which aims to maintain inflation around 2%. Core PCE, excluding food and energy, also rose by 0.1% monthly and 2.7% annually, aligning with expectations. The report indicated a mixed performance in prices, with goods decreasing by 0.2% and services increasing by 0.2% in August. Year-over-year, prices for goods fell by 0.9%, while services rose by 3.7%. Food prices saw a slight increase of 1.1%, while energy prices dropped by 5%. Wages and salaries increased by 0.5% in August, reflecting a slight acceleration compared to July's 0.3% growth, but still slower than the 1% rise observed in January. The personal savings rate also declined to 4.8%, down from 4.9% in July and 5.5% in January. These economic indicators come as the Federal Reserve recently implemented its first interest rate cut in four years, reducing the benchmark federal funds rate by 50 basis points. Chair Jerome Powell emphasized that the decision to cut rates was not a sign of economic deterioration but rather a strategic move. The Fed plans to evaluate future rate cuts based on incoming economic data, indicating a flexible approach to monetary policy. Market expectations suggest a likelihood of another rate cut in November, reflecting ongoing concerns about economic growth and inflation trends.