US core personal consumption expenditures prices rose 0.2% in August from July, below the 0.3% forecast, while the annual increase of 3.0% undershot all 51 forecasts in a Bloomberg survey. Traders further reduced bets on an October Fed rate hike after Wednesday’s report, with Kalshi pricing a 65% chance of no increase and a 31% chance of a quarter-point hike.

The annual core inflation reading, compared with a consensus forecast of 3.3%, primarily reflected larger downward revisions to earlier months rather than August alone. The three-month annualized core inflation rate was 2%. Headline PCE inflation was 3.4% from a year earlier, below the 3.7% forecast. July’s annual headline and core readings were each revised down by 0.3 percentage point, leaving August’s rates unchanged from those revised levels.

Consumer demand remained firm: spending adjusted for inflation rose 0.6% in August, the strongest monthly gain since March 2025, while second-quarter GDP growth was revised to a 2.2% annual rate from 1.5%. The further retreat in hike bets followed New York Fed President John Williams’s statement Tuesday that “there is no need for urgency” after September’s rate increase. He said another hike “may be appropriate late this year” if the economy follows his forecast.