The core Personal Consumption Expenditures (PCE) price index in the United States increased by 0.2% in August, a moderate pace that points to direct relief for household budgets and global import prices.

Over the past twelve months, headline consumer inflation stood at 3.4%, coming in below market forecasts and significantly lower than last year, when steep price spikes squeezed ordinary weekly grocery bills.

Understanding the metric

Understanding the index: the PCE index tracks changes in personal spending and serves as the preferred benchmark for the Federal Reserve (the US central bank) when setting interest rates. The core reading strips out volatile food and energy costs, offering policymakers a clearer picture of underlying price trends without temporary shocks from agricultural weather or oil price swings.

Slowing price growth reinforces expectations that the US monetary authority could pause rate hikes or prepare rate reductions, lowering borrowing costs for households and businesses alike.

The data also lifted sentiment in Brazilian financial markets, where the US dollar fell 0.81% against the Brazilian real to close at R$ 5.17, while the benchmark Ibovespa stock index advanced on stronger global risk appetite.