On September 30 at 15:30 MSK, the US inflation report for August was released. All key price indicators came in below forecast, after which the market quickly revised its expectations for the future path of the Fed rate. The probability of a rate hike in October decreased from 64% at the beginning of the week to 34%.
What exactly came out
Core PCE, the personal consumption expenditures price index excluding food and energy, came in at +3.0% year over year versus a forecast of 3.3% and a previous reading of 3.3%. Month over month, the indicator rose 0.2% versus the expected 0.3%. Headline PCE came in at +3.4% year over year versus a forecast of 3.7%. The previous reading was also 3.7%. Month over month, headline PCE rose 0.3% versus expectations of +0.4%.
Income and spending
Americans' personal income rose 0.2% in August versus a forecast of 0.4%. A month earlier, growth was 0.4%. Spending increased 0.9% versus a forecast of 0.8% after +0.2% in July. Spending is growing noticeably faster than income.
Market reaction
After the release, the dollar moved lower against major currencies. The initial move was about 25 pips. US Treasury yields declined by roughly 4-5 basis points across the curve. One basis point equals 0.01 percentage point. Buying came into stocks and gold. The move then appeared in BTC and ETH.
Why this matters
PCE is one of the Fed's key inflation gauges and is used by the regulator when assessing inflation's movement toward the 2% target. Readings below forecast reduce pressure on the Fed regarding further tightening of monetary policy. At the same time, on September 30, the third estimate of US GDP for the second quarter of 2026 was released, but the market's main attention after publication was focused on the inflation data. The BEA confirms that the PCE reports for August and GDP for the second quarter were scheduled for the same time on September 30. US Bureau of Economic Analysis
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