Core PCE cools to 3.0% in August, softer than markets expected
Investors digested a cooler-than-forecast August inflation report from the Commerce Department. Core personal-consumption prices increased 0.2 percent monthly and 3.0 percent from a year earlier, below market expectations.
The Bureau of Economic Analysis said Wednesday that the personal consumption expenditures price index — the inflation measure the Federal Reserve watches most closely — rose 0.3% in August after seasonal adjustment, lifting the 12-month rate to 3.4%. Excluding food and energy, core PCE increased 0.2% for the month and 3.0% from a year earlier. Those annual readings landed softer than many pre-release consensus forecasts near 3.7% headline and 3.3% core.
BEA’s tables also show personal income up 0.2% and consumer spending up 0.9% in August, with the personal saving rate at 4.1%. Energy was a clear monthly driver: gasoline and other energy goods jumped, and transportation services accelerated, even as the core measure cooled versus expectations. The release arrived with BEA’s 2026 annual update of the National Economic Accounts, which revises methodology for several PCE components back through 2021 — a one-time shift markets had flagged as a reason annual rates could print lower without proving a sudden new disinflation trend.
In a parallel Commerce Department report Wednesday, CNBC said the third estimate of second-quarter GDP showed the economy growing at a 2.2% annualized pace, revised up from the prior 1.5% estimate, with stronger contributions from consumer and government spending and investment. Second-quarter PCE inflation measures were also nudged lower in that GDP package, according to the same account.
Futures firmed and Treasury yields eased after the softer annual core print, with traders pricing less chance of an October rate hike and shifting more of the next hike odds toward December, CNBC reported. Strategists still cautioned that August data predate September’s diesel and oil spike tied to Middle East supply risk, so Friday’s jobs report and the next FOMC window remain live. For readers, the durable facts are the printed monthly and annual PCE figures; the open debate is how much of the cooler year-over-year path is methodology versus true underlying cooling — and whether that is enough to keep the Fed on hold in October.
Where outlets agree BEA, CNBC, Fox Business, and Trading Economics report the same August print: headline PCE up 0.3% month over month and 3.4% year over year; core PCE up 0.2% and 3.0%.
Where they differ Desks diverge on whether the softer annual rates mainly reflect BEA’s methodology revisions in the annual update — or a lasting cool-down that locks out an October hike — especially with September energy prices still feeding into later data.