The August PPI data provide more encouragement for the Fed that inflation has been tamed. Together the CPI and PPI data point to a muted 0.14% m/m increase in the core PCE deflator last month, with the headline PCE deflator up 0.10% and core services (ex-housing) prices increasing by a modest 0.17%. Note, however, that while such a muted monthly gain would be enough to leave the three-month annualised rate for core PCE at 1.9% and the six-month annualised rate at 2.3%, unfavourable base effects mean that the annual inflation rate would edge up to 2.7%, from 2.6%.
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