Softer Reading On Fed's Key Inflation Gauge Won't Stop Another Hike

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A softer-than-expected inflation reading won't stop the Federal Reserve raising rates again before the year is out, warns the CEO ofdeVere Group, one of the world's largest independent financial advisory organisations.

The comments from Nigel Green come as the personal consumption expenditures price index, the Fed's preferred inflation gauge, shows prices up 3.4% over the past year, still well above the central bank's 2% target.

Core prices, which strip out food and energy, rose 0.2% in August, taking the annual rate to 3%. Both came in below forecasts, but they arrived alongside sweeping changes to how the Bureau of Economic Analysis calculates the index.

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The BEA has revised its methods back to 2021 for items including legal services, software and portfolio management fees. Economists had expected the changes alone to shave two or three tenths of a percentage point off annual inflation.

The Fed lifted its target range to 3.75% to 4% on September 16, its first hike in three years, and the vast majority of policymakers pencilled in at least one more increase before the end of 2026. Today's figures are the last PCE reading officials will see before they meet on October 28.

Nigel Green says the Fed's own messaging leaves little room for a pause.

Energy is still pouring fuel on the fire. The conflict involving Iran has kept pressure on oil, and diesel now averages more than $6.50 a gallon, up around 75% in a year.

Borrowing costs are already biting. The average 30-year fixed mortgage rate has pushed above 7%, its highest since January 2025, while the 10-year Treasury yield has broken through 5%.

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