August PCE Inflation Comes In Below Forecasts, Stocks Edge Higher

The Commerce Department's August reading on personal consumption expenditures (PCE), the inflation gauge the Federal Reserve watches most closely, came in below expectations even as consumer spending held up. That combination — cooler prices without a spending pullback — is the scenario investors have been hoping for, and stocks moved mostly higher in the September 30 session on the news. The report matters because it feeds directly into the Fed's next interest-rate decision. Inflation running softer than forecast gives the central bank more room to keep cutting rates without worrying that strong spending will reignite price pressure. For a market that has spent much of the year parsing every inflation print for rate-cut signals, a benign PCE report removes one source of uncertainty heading into the fourth quarter. What remains unresolved is whether this softer print holds up in the September data due out next month, or whether tariff-related cost pressures that have shown up elsewhere in the economy start to bleed into the PCE numbers.