[UPDATE] August PCE inflation was 3.4%, below the 3.7% forecast, cutting October Fed hike odds to 35% from 45%

The Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index, rose 3.4% in the 12 months to August, figures released Wednesday, Sept. 30 showed. Economists had expected 3.7%. Core PCE (prices minus food and energy) also came in below forecasts. Traders' odds of another Fed rate hike in October fell to about 35% from about 45% before the release (LSEG, via The Guardian). Why a hike is on the table. The Fed raised rates in September for the first time since 2023. Justin Wolfers wrote on X that futures markets think the chance of a pre-election hike has "fallen sharply, although it remains a very real possibility." The spending. Inflation-adjusted consumer spending rose 0.6% in August, the biggest monthly gain since March 2025, Bloomberg reports. The Washington Post puts the rise at 0.9% and reports that Americans drew down their savings to pay for it. Real disposable income was flat, and the personal saving rate fell to 4.1% from a revised 4.6% in July, its lowest since November 2022, per the Bureau of Economic Analysis (BEA).