Topline
Americans appeared to slow down their spending last month amid President Donald Trump’s tariffs, according to federal data released Friday, which showed the Federal Reserve’s preferred inflation gauge matched Wall Street’s projections for August.
Fed Chair Jerome Powell earlier this week suggested the “near-term risks” of inflation had improved.
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Key Facts
Annual inflation was 2.9% in August, matching July’s price increases, the Bureau of Economic Analysis reported Friday for core personal consumption expenditures (PCE) price index data, while also meeting consensus economist forecasts, according to FactSet.
August’s inflation reading remained above the Fed’s 2% target for core PCE inflation, the central bank’s favored measurement of price changes that excludes the more volatile food and energy markets, for the 54th consecutive month.
Headline PCE inflation was 2.7%, matching projections and 0.1% above July’s price increases.
Inflation-adjusted consumer spending rose 0.4% month-over-month, down from July’s 0.5% increase, while personal income increased 0.4%.
What To Watch For
The latest inflation reading comes one week before September’s jobs report is released by the Bureau of Labor Statistics. Wall Street anticipates the unemployment rate to remain at 4.3% as the U.S. is expected to have added 45,000 jobs, up from the dismal 22,000 added in August, according to FactSet.
Key Background
The Federal Reserve looks to core PCE data more than inflation readings by the Bureau of Labor Statistics because it allows the central bank to better understand how Americans spend their money and how their spending habits change. The Fed adheres to a dual mandate of full employment and stabilized inflation of around 2%, though Fed Chair Jerome Powell noted earlier this week the “near-term risks” of inflation were “tilted to the upside.” Unemployment and a weakening job market has become a primary concern, Powell said, and was responsible for the Fed opting to cut interest rates down to between 4% and 4.25%. Traders are expecting the Fed to once again ease rates following its October policymaking meeting, with 85.5% odds of rates lowering another quarter-point to between 3.75% and 4%, according to CME’s FedWatch. The probability appeared to lower on Thursday, after earlier estimates for economic growth were revised nearly a full percent above initially reported figures. Monetary policymakers nearly voted unanimously for the cut, while Fed Governor Stephen Miran, appointed by President Donald Trump in recent weeks, has argued in favor of steeper reductions as much as 2%.
Further Reading
Source: https://www.forbes.com/sites/tylerroush/2025/09/26/high-inflation-persisted-in-august-as-spending-slowed/
