Key inflation gauge watched by the Federal Reserve hits another 30-year high

Inflation ran at a fresh 30-year high in August as supply chain disruptions and extraordinarily high demand fueled ongoing price pressures, the Commerce Department reported Friday.

The core personal consumption expenditures price index, which excludes food and energy costs and is the Federal Reserve’s preferred measure of inflation, increased 0.3% for the month and was up 3.6% from a year ago. The monthly gain was slightly higher than the 0.2% Dow Jones estimate and the annual forecast of 3.5%.

That’s the highest since May 1991 and reflective of inflationary pressures that Fed Chairman Jerome Powell said earlier this week he finds “frustrating.”

On a headline basis, PCE prices rose 0.4% for the month and 4.3% year over year, the highest since January 1991. That reflected a 24.9% increase in energy prices and a 2.8% rise in food.

Goods prices rose by 5.5% while services increased by 3.6%.

The rise in inflation came as personal income increased 0.2% for the month, in line with estimates but indicative that real income is falling as inflation rises. Spending accelerated 0.8%, slightly above the 0.7% forecast.

Personal savings totaled $1.71 trillion, running at a 9.4% rate and a decrease from 10.1% in July. The savings rate peaked at 33.8% in April 2020 in the early days of the pandemic as the government rushed out payments to individuals and businesses were shut down to combat the Covid spread.