US Core PPI Inflation Hits Highest Level Since May 2023, while Core PCE Inflation Drops to Lowest Since May 2021

The U.S. September core PPI inflation rose to 2.7% year-on-year, the highest since May 2023. The PCE-based Ecumenical Underlying Inflation measure was 2.7% in August. The Fed's preferred measure of inflation, Core PCE, moved down to 3.9% in August, the lowest since May 2021. The Fed Funds Rate is now 1.5% above core PCE, the most restrictive monetary policy seen since November 2007. Core inflation in August was 2.2% using a three-month annualized rate. The core PCE price index rose 0.14% in August from July. Monthly core PCE inflation in August was +0.1%, below expectations of +0.2%. The latest data shows that over the last 3 months, core PCE inflation ran at an annualized rate of 2.16%, which is at the Fed's target. August PCE inflation, the Fed's preferred inflation metric, rose to 3.5%, in line with expectations. Core PCE inflation fell to 3.9%, also in line with expectations. Headline inflation is rising, but core inflation is finally falling.