The US Federal Reserve's preferred measure of inflation has come in lower than expected, potentially delaying an interest rate hike until December.
What happened
The core Personal Consumption Expenditures (PCE) price index rose 0.2% in August, below estimates of 0.3%, and at a 3% annual rate, lower than the predicted 3.3%. Overall PCE increased 0.3% over the month at a 3.4% annual rate, also below estimates.
Economists attribute the lower inflation reading partly to a change in methodology for measuring prices. Despite this, inflation remains above the Fed's 2% target. The job market and economic growth continue to show resilience, with the economy growing at a 2.2% annualized pace in the second quarter and private employment increasing by 90,000 jobs in September.
The lower inflation data may give the Fed more flexibility in its decision-making, potentially leading to a delay in the next interest rate hike. Stocks rose modestly after the economic releases, with the Dow Jones Industrial Average slipping 0.9% and the Nasdaq closing up 0.2%.
