The Federal Reserve's preferred inflation metric, the Personal Consumption Expenditures (PCE) Index, has shown its slowest growth since September 2021, according to data released on Friday, September 29, 2023. The PCE Index recorded a year-over-year growth of 3.5% for August, a slight increase from July's 3.4%, matching economists' expectations.
The core PCE, which excludes the often volatile food and energy categories, grew at a rate of 3.9%, down from 4.1% in July. This marks the lowest annual increase seen by this index in two years. On a monthly basis, the core PCE rose by 0.1% in August, down from July's 0.2%.
The overall PCE index, which includes food and energy categories, rose by 0.4% from July and 3.5% annually. Despite this being an acceleration from the respective rates of 0.2% and 3.3% seen in July, it was largely expected due to rising gas prices during the month.
These figures align with August's Consumer Price Index (CPI), another key inflation measure, which also demonstrated a cooling trend in core price increases. The CPI report for August showed headline inflation at 3.7%, driven primarily by higher oil and food prices.
Federal Reserve Chair Jerome Powell has frequently referred to the core PCE as a key inflation measurement. Last Wednesday, Powell noted that inflation remains "well above our longer-run goal of 2%." This observation followed the Fed's decision to keep interest rates within a range of 5.25%-5.50%, the highest level since March 2001. The Fed also indicated plans to hold interest rates higher for longer than previously anticipated to curb inflation.
The Commerce Department's latest Personal Income and Outlays report also highlighted a slowdown in consumer spending in August, while incomes increased by 0.4%.
According to InvestingPro data, the Federal Reserve has a market cap of 45.99M USD and a P/E ratio of 3.13. The bank's revenue as of the second quarter of 2023 was 13.0M USD, showing a growth of 16.41% from the last measurement. The Fed's gross profit for the same period was 9.24M USD, amounting to a gross profit margin of 71.06%.
In line with InvestingPro Tips, the Fed is a prominent player in the Banks industry (Tip 6) and has been profitable over the last twelve months (Tip 12). This information and more can be found at InvestingPro, which provides an additional 12 tips for investors.
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