August 2026 PCE Inflation Falls Below Forecast as Fed Weighs Next Move
The Federal Reserve’s preferred inflation gauge delivered a cooler-than-expected reading for August 2026, offering cautious optimism ahead of the October policy meeting. The Personal Consumption Expenditures (PCE) index rose 3.4% year-over-year on a headline basis, below the 3.7% forecast, while core PCE, which strips out food and energy, climbed 3.0% annually, undercutting the expected 3.3%. New York Times
On a monthly basis, core PCE rose just 0.2% against a 0.3% estimate, and headline PCE gained 0.3% versus a 0.4% projection. The data suggests price pressures are easing more steadily than economists anticipated.
The report arrives weeks after the Federal Reserve raised rates by 25 basis points in September; its first hike in three years, signalling renewed concern over sticky inflation. However, CME FedWatch now prices a 65.1% probability that the Fed holds rates steady at its October meeting.
Personal savings fell to 4.1% from 4.6%, indicating consumers continue spending despite elevated borrowing costs. Economists warn that while the trend is improving, inflation remains well above the Fed’s 2% target.
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