The latest reading of the Fed’s favorite inflation gauge showed that prices rose more slowly than expected in August on a monthly basis.
The core Personal Consumption Expenditures (PCE) index, which excludes food and energy costs and is closely watched by the Federal Reserve, rose 0.1% in August from the previous month, below Wall Street expectations for 0.2% and the 0.2% index. seen in July.
Over the previous year, prices rose 2.7% in August, matching Wall Street expectations and up from 2.6% in July.
The report is the first look at inflation since the Federal Reserve cut interest rates by half a percentage point on September 18. At a press conference after the decision, Powell noted that the Fed now has “more confidence” in the path inflation takes along the central bank’s line. Target of 2%.
Powell argued that further cooling in the labor market is now as much of a concern for the Fed as inflation.
“The upside risks to inflation have actually declined, the downside risks to employment have increased,” Powell said. “And because we have been patient and not cut back while inflation has fallen, I think we are now in a very good position to manage the risks to both of our objectives.”
Friday’s data comes as investors debate whether the Fed will cut rates by 25 or 50 basis points at its November meeting. As of Friday morning, investors had priced in a 50% chance of a 50 basis point rate cut, according to the CME FedWatch Tool.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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