The Federal Reserve's preferred inflation gauge, the personal consumption expenditures (PCE) price index, showed smaller-than-expected annual increases in August, according to a Commerce Department report released Wednesday.
Headline PCE rose a seasonally adjusted 0.3% for the month, putting the 12-month gain at 3.4%. Economists surveyed by Dow Jones had forecast increases of 0.3% and 3.7%, respectively. Excluding food and energy, core PCE climbed 0.2% for the month, with the annual rate at 3%, below the forecast of 0.3% monthly and 3.3% annually. The Fed officially tracks headline PCE, though officials generally view core as a better indicator of longer-term inflation trends.
The Bureau of Economic Analysis adjusted the way it computes several components of the index for this report, and it was not immediately clear what impact the revisions had on the final numbers.
Stock market futures gained ground following the release while Treasury yields moved lower. Traders priced in less of a chance of a Fed rate hike in October, shifting the next expected increase to December. "This is good news for investors worried about the recent surge in bond yields, and it bolsters the case for not hiking in October," said David Russell, global head of market strategy at TradeStation. He added that the data is "relatively old" and does not reflect this month's surge in diesel prices.
