Underlying U.S. inflation pressures moderated in August, with the annual rise in prices excluding food and energy falling below 4.0% for the first time in more than two years, welcome news for the Federal Reserve as it ponders the monetary policy outlook.
But the battle against inflation is far from being won as the report from Commerce Department on Friday showed overall prices remaining elevated, partly because of higher gasoline prices. Still, slowing underlying inflation raised hopes that the U.S. central bank will not raise interest rates in November.
“We continue to expect a slower pace of growth going forward and a further easing in price pressures, which should keep the FOMC (Federal Open Market Committee) on the sidelines for the rest of 2023,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, gained 0.1%. That followed a 0.2% advance in July. Economists polled by Reuters had forecast the core PCE price index would climb 0.2%.