Fed’s favored inflation gauge climbs slightly in August

The Federal Reserve’s favored inflation gauge accelerated slightly in August from 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 from a 2.6% year-over-year increase in July and most since February.

Excluding volatile food and energy prices, so-called core PCE inflation showed a 2.9% increase in prices from August 2024, the same as in July. The increases were what forecasters had expected.

Prices rose 0.3% from July, compared to a 0.2% increase the month before. Core prices rose 0.2%, the same as in July.

Separately, the report showed that inflation-adjusted consumer spending rose a healthy 0.4% from July, same as the month before, largely on a 0.7% increase in spending for goods; spending on services such as travel and dining out rose just 0.2%.

“The resilience of the US consumer was on show once again,” Michael Pearce of Oxford Economics wrote, though he cautioned that spending ”is being driven by households at the top of the income distribution.”

Incomes rose 0.4%, same as the month before inflation. Income for the self-employed and business owners rose 0.9% for the second straight month. Wages and salaries rose 0.3% from July, dipping from a 0.5% increase the month before.

Inflation has come down since rising prices prompted the Fed to raise its benchmark interest rate 11 times in 2022 and 2023. But annual price gains remain stubbornly above the central bank’s 2% target.

Last week, the Fed went ahead and reduced the rate for the first time this year, lowering borrowing costs to help a deteriorating U.S. job market. But it’s been cautious about cutting, waiting to see what impact President Donald Trump’s tariffs have on imports have 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 s ought to fire Lisa Cook, a member of the Fed’s governing board, in an effort to gain greater control over the central bank. She has challenged her dismissal in court, and the Supreme Court will decide whether she can stay on the job while the case goes through the judicial system.

The Fed tends to favor the PCE inflation gauge that the government issued Friday over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.

—Paul Wiseman, AP economics writer