US PCE inflation falls to 2.2% in August

Global financial markets continued to reflect risk-on sentiment on Friday, fueled by broad-based monetary easing and a major lift from China’s recent stimulus measures. The S&P 500 marked a new record high for the third consecutive session this week.

The Federal Reserve's preferred gauge of U.S. inflation and consumer spending showed modest gains in August, suggesting a cooling economic environment. The core Personal Consumption Expenditures (PCE) price index, which strips out volatile food and energy prices, edged up 0.1% from the previous month, according to data released by the Bureau of Economic Analysis. On an annualized three-month basis, the core PCE rose 2.2%, aligning with the Fed's 2% inflation target.

Source: Bloomberg

Meanwhile, consumer spending, when adjusted for inflation, also increased by 0.1%, while nominal personal income saw a slight 0.2% rise. The personal saving rate ticked down to 4.8%, reflecting a pullback from previous months.

Federal Reserve Governor Lisa Cook voiced strong support for last week’s 50 basis point rate cut, characterizing it as a sign of growing confidence in the Fed’s ability to maintain a healthy labor market while steering economic growth. In a speech delivered overnight, Cook emphasized that the rate cut is consistent with the ongoing efforts to guide inflation back to the central bank’s 2% objective.

Looking ahead, Cook highlighted the need for a cautious approach, noting that policymakers will be closely monitoring incoming data and weighing potential risks before taking further actions. "It’s crucial to evaluate evolving economic conditions as we consider additional measures," she said.