#PCEInflationWatch The latest PCE inflation report shows a 2.7% year-over-year increase in headline PCE prices for August, with core PCE inflation holding steady at 2.9%. Here's what you need to know ¹ ²:

- *Headline PCE Inflation:* Rose 0.3% month-over-month and 2.7% year-over-year, slightly above July's 2.6% annual rate.

- *Core PCE Inflation:* Increased 0.2% month-over-month and remained at 2.9% year-over-year, matching economists' forecasts and staying above the Federal Reserve's 2% target.

*Key Drivers:*

- *Goods Prices:* Rebounded with a 0.1% month-over-month increase, with goods prices up 0.9% year-over-year.

- *Services Costs:* Continued upward trajectory, rising 0.3% month-over-month and 3.6% year-over-year.

- *Tariffs:* Fed Chair Jerome Powell acknowledged that tariffs are contributing to inflation, creating additional policy challenges ¹ ² ³.

*Market Reaction and Fed Outlook:*

- *Market Expectations:* Investors expect a 25-basis-point policy rate cut by the Federal Reserve in October, with a high probability.

- *Fed's Next Move:* The Fed faces a delicate balancing act between supporting a weakening labor market and preventing inflation from becoming entrenched.

- *Rate Cuts:* Further rate cuts are anticipated, contingent on upcoming economic data, including labor market and inflation readings ¹ ⁴.