WASHINGTON — The Federal Reserve’s favored inflation gauge accelerated slightly in August compared to a year earlier.
The Commerce Department reported Friday that its Personal Consumption Expenditures (PCE) price index was up 2.7% in August from a year earlier, a tick higher than the 2.6% year-over-year increase recorded in July, marking the highest rate since February.
Excluding volatile food and energy prices, the so-called core PCE inflation showed a 2.9% increase in prices from August 2024, the same rate as in July. These increases were in line with forecasters’ expectations.
Inflation has come down since rising prices prompted the Fed to raise its benchmark interest rate 11 times in 2022 and 2023. However, annual price gains remain stubbornly above the central bank’s 2% target.
Last week, the Fed reduced the rate for the first time this year, lowering borrowing costs to help a deteriorating U.S. job market. Despite this, it has been cautious about further cuts, waiting to see the impact of President Donald Trump’s sweeping taxes on imports on inflation and the broader economy.
For months, Trump has relentlessly pushed the Fed to lower rates more aggressively, calling Fed Chair Jerome Powell “too late” and a “moron,” and arguing that there is no inflation. Last month, Trump attempted to fire Lisa Cook, a member of the Fed’s governing board, in an effort to gain greater control over the central bank.
Cook has challenged her dismissal in court, and the Supreme Court will decide whether she can remain in her position while the case proceeds through the judicial system.
The Fed tends to favor the PCE inflation gauge issued by the government over the better-known Consumer Price Index (CPI). The PCE index attempts to account for changes in consumer behavior when inflation jumps. For example, it captures when consumers switch from pricier national brands to cheaper store brands.
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