Inflation Figures Ease Pressure on Fed

Inflation is still running hotter than the Federal Reserve wants, but August's numbers landed a bit softer than Wall Street expected. The Commerce Department said the Fed's preferred gauge, the personal consumption expenditures index, rose 3.4% from a year earlier, versus forecasts of 3.7%, with gas prices behind much of the rise, CNBC reports. Stripping out food and energy, core prices were up 3%, also below expectations. The Fed's 2% target remains out of reach. On a monthly basis, prices rose 0.3% in August, up from a 0.1% rise in July, reports the AP. Core prices were up 0.2%.

Methodology tweaks by the Bureau of Economic Analysis helped reduce the inflation reading, CNBC reports. The BEA changed how it measures prices for legal services, software and computer accessories, and portfolio management. July's inflation figure was revised from 3.7% to 3.4%. The Wednesday report also showed incomes up 0.2% and spending up 0.9%, while second-quarter GDP was revised sharply higher to 2.2% annualized. Economists still expect the Fed to raise its key rate at least once more this year, the AP reports. "Inflation's trend is lower but still not close to their target and not improving, either," says Bill Adams, chief US economist at Fifth Third Commercial Bank.