In August, inflation in the U.S. moved closer to the Federal Reserve’s target, with the personal consumption expenditures price index rising 0.1% for the month. This brought the 12-month inflation rate to 2.2%, down from 2.5% in July. Core inflation, which excludes food and energy, also rose 0.1% in August and was up 2.7% from a year ago.
Despite the positive inflation numbers, personal spending and income figures for August came in below expectations. Personal income increased by 0.2% and spending rose by 0.2%, lower than the expected 0.4% and 0.3% increases, respectively. The stock market responded positively to the inflation report, while Treasury yields were negative.
The Federal Reserve recently lowered its benchmark interest rate by half a percentage point, and the August inflation progress was seen as a positive sign for future rate cuts. However, concerns remained about housing-related costs, which saw a significant increase in August.
Fed officials have shifted their focus from inflation to supporting the labor market, which has shown signs of softening. They indicated the likelihood of further rate cuts in the future, though the market expects a more aggressive approach.
Overall, the inflation numbers in August were seen as positive, providing room for the Federal Reserve to implement future rate cuts to support the economy. Services prices increased, while goods saw a decline, indicating a mixed picture of inflation across different sectors of the economy.
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