US inflation cools in August as soft PCE reading trims October rate-hike bets

US inflation rose less than expected in August, trimming bets on another Federal Reserve rate hike next month. Headline PCE gained 0.3%, below the 0.4% economists polled by Reuters forecast, after July was revised to 0.1%. Over the 12 months to August, inflation was 3.4% — well below the 3.7% expected — with July revised down from 3.7% (Reuters).

Core PCE rose 0.2% on the month versus a 0.3% forecast and stood at 3.0% year-on-year against 3.3% expected. The Bureau of Economic Analysis revised its methodology back to 2021 for software, portfolio fees and legal services — a change economists estimate shaved two or three tenths of a point off annual readings (Reuters; business-money.com).

Consumer spending rose 0.9% against a 0.8% forecast, while personal income grew just 0.2%, below the 0.4% expected. A 4.4% jump in gasoline prices drove the monthly rise (CNBC TV18).

The Fed lifted its rate to 3.75%-4.00% on September 16, its first hike in three years. After New York Fed President John Williams said he saw “no urgency” for further moves, odds of an October hike fell to 35%, from 51% a day earlier and 71% a week ago (Reuters; Barron’s). It is the last PCE reading before the Fed’s 27-28 October meeting (business-money.com).

“Anyone treating today’s numbers as a green light for the Fed to stand down is, we expect, going to be making a big mistake,” said Nigel Green, CEO of deVere Group. “Headline inflation at 3.4% is still miles above target” (business-money.com).

Sources

• Reuters, “US inflation rises less than expected in August; consumer spending surges”, 30 Sept 2026 — https://www.reuters.com/markets/us/us-inflation-rises-less-than-expected-august-consumer-spending-surges-2026-09-30/
• CNBC TV18, “US inflation comes in below estimates as Q2 GDP growth revised higher”, 30 Sept 2026 — https://www.cnbctv18.com/economy/us-core-pce-inflation-data-3-pc-august-below-estimates-20002325.htm
• Barron’s live coverage, “Cooler Inflation Data Trim Odds of an October Fed Rate Increase”, 30 Sept 2026 — https://www.barrons.com/livecoverage/pce-inflation-report-august-fed-rates/card/cooler-inflation-data-trim-odds-of-an-october-fed-rate-increase-ILU4tFhIQyD725K6SJZI
• Investopedia, “Stock Market Today: Nasdaq, S&P 500 Rise After Inflation Data Comes in Softer Than Expected”, 30 Sept 2026 — https://www.investopedia.com/stock-market-today-dow-jones-s-and-p-500-09302026-12148860
• business-money.com, “Softer reading on Fed’s key inflation gauge won’t stop another hike: deVere CEO”, 30 Sept 2026 — https://www.business-money.com/announcements/softer-reading-on-feds-key-inflation-gauge-wont-stop-another-hike-devere-ceo/