Key Fed inflation gauge slows to 2.2% in August

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The pace of the annual increase in the US Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve's preferred inflation gauge — slowed in August, and it posted a lower-than-expected monthly rise, supporting the likelihood of continued monetary policy easing by the central bank.

According to data released on Friday by the US Bureau of Economic Analysis, the PCE Price Index rose by 2.2% year-over-year in August, after increasing 2.5% in July and compared to expectations of 2.3%.

The data also showed that the core PCE index — which excludes volatile food and energy prices and is more closely watched by the Federal Reserve — increased by 2.7%, compared to a 2.6% rise in July.

On a monthly basis, both the overall and core indices rose by 0.1% in August after a 0.2% increase in the previous month, and against expectations of a 0.2% rise.

Personal income in the U.S. increased by 0.2%, equivalent to $50.5 billion, in August, while disposable income — personal income after taxes — also rose by 0.2%, or $34.2 billion.

Meanwhile, personal consumption expenditures increased by 0.2%, or $47.2 billion, after rising 0.3% in each of the previous two months, according to the data.