Key indicators of inflation appear to remain well above levels consistent with the Federal Reserve's price stability goal.
On Friday, the Bureau of Economic Analysis said the so-called core personal consumption expenditures (PCE) price index, which excludes food and energy prices, rose 0.1% from July. This was in line with expectations and lower than last month's 0.2% rise.
Compared to a year ago, core prices rose by 2.7%, slightly higher than the 2.6% recorded last month. Before rounding, the change was even smaller, from 2.64941 percent to 2.67847 percent.
The Fed targets inflation at 2% in the headline price index. For the month, the rate of increase was 0.1%, slowing down from 0.2% in July. For the year, the overall index rose 2.2%, slightly below expectations of 2.3% and well below the 2.5% recorded a month ago.
The PCE Price Index, compiled by the Department of Commerce's Bureau of Economic Analysis, has generally been lower than the well-known Consumer Price Index (CPI) compiled by the Department of Labor's Bureau of Labor Statistics throughout recent inflationary cycles. It peaked at 7.2% in June 2022, while the CPI reached 9% in the same month.
The PCE inflation measure covers a broader range of spending, including spending made on behalf of households (such as employer-provided health care), and changes consumption patterns, such as when consumers switch products when prices rise. Changes are reflected more quickly.
PCE inflation fell in the 12 months from its peak in 2022, but has since stalled above 3%, one percentage point above the Fed's 2% target. However, the index has been declining continuously since May.
However, the core index took a different path. After peaking at 5.6% in 2022, it followed a bumpy downward trajectory for almost two years. But the index has barely moved since May, raising concerns that underlying inflation pressures are no longer easing.
