The Personal Consumption Expenditures (PCE) inflation data is a key metric watched closely by the Federal Reserve, as it's their preferred gauge for measuring inflation. Let's break down the latest numbers:
Key PCE Inflation Figures for August 2025
◾Core PCE Inflation (excluding food and energy) : Held steady at 2.9% year-over-year, matching forecasts.
◾Monthly Core PCE Change : Up 0.2% month-over-month, as expected.
◾Headline PCE Inflation : Rose 2.7% year-over-year, highest since April 2024.
◾Monthly Headline PCE Change : Up 0.3% month-over-month, in line with expectations.
What Does This Mean?
The Fed targets inflation at *2% over the longer run*, and current PCE readings are above this goal. The data suggests inflation remains somewhat elevated, influencing the Fed's monetary policy decisions, like potential rate cuts.
Fed's Perspective
Fed Chair Jerome Powell has noted the annual PCE inflation rate was around 2.7% in August, with core PCE at 2.9%. Markets anticipate the Fed might cut rates, with a 25 basis point cut expected in October .
Why PCE Matters
The PCE index captures inflation across a broad range of consumer expenses and reflects changes in consumer behavior, making it a comprehensive inflation measure for policymakers.