The Federal Reserve’s favored inflation gauge accelerated slightly in August from a year earlier.
The Commerce Department reported Friday that its personal consumption expenditures (PCE) price index was up 2.7% in August from a year earlier, a tick higher than the 2.6% year-over-year increase in July and the highest since February.
Excluding volatile food and energy prices, so-called core PCE inflation rose 2.9% from August 2024, unchanged from July. The increases matched forecasters’ expectations.
Prices rose 0.3% from July, compared with a 0.2% increase the month before. Core prices rose 0.2%, unchanged from July.
Separately, the report showed that inflation-adjusted consumer spending rose 0.4% from July, the same as the month before, largely on a 0.7% increase in spending on goods. Spending on services such as travel and dining out rose just 0.2%.
“The resilience of the US consumer was on show once again,” Michael Pearce of Oxford Economics wrote, though he cautioned that spending “is being driven by households at the top of the income distribution.”
Incomes rose 0.4%, the same as the month before inflation. Income for the self-employed and business owners rose 0.9% for the second straight month. Wages and salaries rose 0.3% from July, down from a 0.5% increase the month before.
Inflation has come down since rising prices prompted the Fed to raise its benchmark interest rate 11 times in 2022 and 2023. But annual price gains remain stubbornly above the central bank’s 2% target.
Last week, the Fed reduced the rate for the first time this year, lowering borrowing costs to help a weakening U.S. job market. But it has been cautious about further cuts, waiting to see what impact President Donald Trump’s tariffs on imports will have on inflation and the broader economy.
For months, Trump has relentlessly pushed the Fed to lower rates more aggressively, calling Fed Chair Jerome Powell “Too Late” and a “moron” and arguing there is “no inflation.”
Last month, Trump sought to fire Lisa Cook, a member of the Fed’s governing board, in an effort to gain greater control over the central bank. She has challenged her dismissal in court, and the Supreme Court will decide whether she can stay on the job while the case works its way through the judicial system.
The Fed tends to favour the PCE inflation gauge reported Friday over the better-known consumer price index. The PCE index attempts to account for changes in how people shop when inflation rises. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.