Stable Core Inflation at 2.9% Highlights Resilient U.S. Economy

The U.S. Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) price index, showed that core inflation—excluding volatile food and energy prices—remained steady at 2.9% in August, unchanged from July. The reading was in line with economists’ expectations, signaling that underlying price pressures in the economy are stable.

The broader PCE index, which includes all items, rose 2.7% year-over-year, slightly up from 2.6% in July, marking the highest level since February. On a monthly basis, core PCE increased 0.2%, while overall PCE rose 0.3%.

Consumer spending, a key driver of economic growth, continued to show resilience. Inflation-adjusted spending climbed 0.4% in August, with goods purchases up 0.7% and services up 0.2%. Personal income also rose 0.4%, supported by a 0.9% increase in self-employment and business income, while wages edged up 0.3%, slightly slower than July’s 0.5% increase.

Financial markets responded positively to the report, with stock futures rising, Treasury yields slightly declining, and the U.S. dollar weakening. Analysts noted that the combination of steady inflation and robust consumer spending suggests a resilient U.S. economy.

The Federal Reserve continues to face a delicate balancing act. While inflation remains above the central bank’s 2% target, the stable reading provides some leeway in monetary policy decisions, as policymakers weigh controlling inflation against supporting growth.