The Federal Reserve's preferred inflation gauge lands Wednesday morning, and economists expect it to confirm what every working American's grocery receipt already says: prices aren't coming down, and the rate hikes meant to fix them are just squeezing Main Street from the other direction.
The Bureau of Economic Analysis releases August Personal Consumption Expenditures data at 8:30 a.m. ET. Dow Jones surveys project both headline and core PCE rose 0.3% from July, with 12-month headline inflation holding at 3.7% and core at 3.3% — both still far above the Fed's 2% target and unchanged from July, according to International Business Times. Translation for anyone not on the Federal Reserve payroll: the central bank's aggressive rate campaign still hasn't restored purchasing power to working Americans, but it has made borrowing more expensive for everyone trying to start or sustain a business.
The Fed already raised its benchmark rate by a quarter point on September 16, pushing the target range to 3.75%–4%. Sixteen of 18 Fed officials who submitted projections at that meeting expect at least one more hike before year's end. New York Fed President John Williams called another increase "reasonable" while pointing to easing housing inflation — though anyone who has rented or mortgaged a home recently might question that assessment.
Meanwhile, consumer confidence cratered in September to its lowest level in more than 12 years, IBT reported. Americans are telling surveyors what their bank balances already confirm: inflation, employment anxiety, and a souring economy are taking their toll. Yet the same data shows personal consumption expenditures are expected to have jumped 0.8% in August after a tepid 0.2% in July — partly driven by higher gas prices. The Fed sees that spending resilience as a problem, because strong demand makes inflation harder to tame. The central bank is trying to cool prices without cratering employment, but working Americans are experiencing the worst of both worlds: higher costs and tighter credit.
Then there's the methodology tweak. BEA is revising how it calculates several PCE components — legal services, software, computer accessories, and portfolio management services — and applying the changes retroactively. The result, IBT noted, could lower previously reported inflation readings. When the numbers don't fit the narrative, Washington changes the math.
President Trump has seized on the rate-hike pain, declaring on Truth Social that rates "should be 1%, or less, because we are the Best Credit in the World — BY FAR." The Washington Post's Zachary Karabell conceded Trump has a point, noting the quarter-point hike drew immediate pushback from a president who understands what tighter money means for the real economy. Whether you trust Trump's economics or not, the question he's raising is the one the Fed doesn't want to answer: who actually pays when the central bank declares war on inflation?
Wednesday's PCE number won't settle that argument. It will just add another data point to the same story — working Americans footing the bill while the architects of this system insist the pain is necessary.
