Surprise Slowdown in US Inflation: PCE Index Hits 3% in August

Key Facts

August data revealed a notable slowdown in the headline Personal Consumption Expenditures index, recording a 3% growth compared to the previous reading of 3.3%, falling below expectations that pointed to a steady 3.3%. In the same context, the overall annual inflation index declined to 3.4% down from 3.7%, while on a monthly basis it ticked up to 0.3% compared to 0.2% previously, and the core monthly index remained stable at 0.2%.

This deceleration in the Federal Reserve's preferred inflation gauge carries profound implications for the monetary policy trajectory, as it reduces the pressure on policymakers to hike interest rates again. These figures are likely to weigh on the US dollar's gains and support risk appetite in equity markets, amid a forward-looking view that leans towards keeping rates on hold for a longer period before easing policy if the current cooling trend persists.