Fed's preferred inflation measure softer than expected in August

Investing.com -- The headline reading of the Federal Reserve's preferred inflation gauge accelerated by less than expected on a monthly basis in August, while the underlying metric unexpectedly slowed compared to July, in a sign of potentially cooling price gains in the U.S. that could give the central bank less headroom to raise interest rates again this year.

According to data from the Commerce Department's Bureau of Economic Analysis, the latest personal consumption expenditures (PCE) price index sped up to 0.4% from 0.2% in July on a monthly basis, just below economists' estimates for an increase of 0.5%. Year-on-year, it jumped to 3.5% from an upwardly revised mark of 3.4%, in line with forecasts.

The pace of the so-called "core" index, which strips out items like food and energy, dipped to 0.1% month-on-month, surprising projections that the number would remain unchanged at 0.2%. Annually, it decelerated to 3.9% from an upwardly revised level of 4.3%, meeting expectations.

Fed officials held rates at a range of 5.25% to 5.50% last week, but flagged that further hikes may be required at their November or December meetings to help cool inflation. They also indicated that policy could need to stay at these elevated levels for a longer than anticipated period of time, a prospect that has weighed on stocks and sent bond yields soaring this week.

The softer-than-anticipated PCE release has fueled hopes that the Fed may ultimately choose to pause any tightening for now, supporting U.S. stock index futures on Friday heading into the last day of September trading.