
The August PCE index shows core inflation lower than expected, while household spending peaks in real growth.
AI-generated summary
The PCE index is the inflation measure favored by the Federal Reserve to guide its monetary policy. The long-term inflation target set by the Fed is 2%.
A little less inflation, a lot more consumption. The US PCE index grew less quickly than expected in August, while household spending recorded its largest real increase since March 2025. This mix supported stocks and Bitcoin, without erasing questions about the Federal Reserve's next decision.
Core PCE slows, but US consumption accelerates
The PCE price index, the Federal Reserve's preferred measure of inflation, increased 0.3% in August and 3.4% year-over-year. The Reuters consensus forecast a monthly increase of 0.4% and an annual rate close to 3.7%.
Excluding food and energy, Core PCE increased by 0.2%, compared to 0.3% expected. Its annual rate falls to 3%, notably thanks to annual statistical revisions carried out by the Bureau of Economic Analysis. Core inflation is therefore slowing more than expected, but still remains far from the 2% objective pursued by the Fed.
However, the report does not describe an economy in decline. Consumer spending increased by 0.9%, while its inflation-adjusted growth reached 0.6%, its highest level since March 2025. At the same time, personal income gained only 0.2% and the savings rate fell to 4.1%.
Households therefore continue to support activity despite the rise in prices and financing costs. This resistance reduces the risk of recession, but it can also maintain inflationary pressures if demand remains higher than income growth for a long time.
Stocks and Bitcoin rebound, the Fed keeps its options
The initial reaction of the markets was positive. Futures on the main US indices extended their rise after the publication, with the lower-than-expected Core PCE reducing the likelihood of a further rate hike as early as October.
Bitcoin also rose to around $84,800, after trading around $83,000 to $84,000 before the report. The decline in monetary fears benefits cryptocurrencies, as lower rates reduce the relative attractiveness of risk-free investments and facilitate the return of capital to more volatile assets.
However, the room for maneuver remains limited. The yield on ten-year Treasuries is still above 5.2%, near its highest level since 2007. These high yields weigh on technology stocks, crypto markets and all assets whose valuation strongly depends on financial conditions.

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