August core personal consumption expenditures prices rose 3.0% from a year earlier, below the 3.3% forecast. The monthly increase was 0.247%, rounding to 0.2% against a 0.3% forecast. After the report, Kalshi priced a 65% chance of no October increase and a 31% chance of a quarter-point hike. The retreat in hike bets followed New York Fed President John Williams’s statement Tuesday that “there is no need for urgency” after September’s increase.
The annual inflation surprise primarily reflected downward revisions to earlier months rather than August alone. The Bureau of Economic Analysis changed its methodology for investment advisory services, software and legal services, revising data back to 2021. Annual core inflation was unchanged from July’s revised 3.0%, while headline inflation held at 3.4%. The 10-year Treasury yield returned to its level before the report at 5.234%.