August inflation below forecasts as spending rises

U.S. inflation rose less than economists expected in August, while consumer spending accelerated, according to Commerce Department data released Wednesday. The figures eased market expectations for another Federal Reserve interest-rate increase in October, though inflation remained above the Fed’s 2% target and the data did not determine the central bank’s next move. The Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, increased 0.3% from July and 3.4% from a year earlier. Economists had forecast increases of 0.4% monthly and 3.7% annually. Core PCE, which excludes food and energy, rose 0.2% on the month and 3.0% over 12 months, below forecasts of 0.3% and 3.3%, respectively. The Commerce Department also reported that consumer spending rose 0.9% in August, following a revised 0.1% gain in July. The increase points to continued household demand even as inflation remains elevated. The figures offer different signals for policymakers: price growth was softer than expected, but spending was strong.