August PCE Inflation Cools to 3.4% (Core 3.0%), Below Forecasts; October Fed Hike Odds Fall to ~35%

The BEA's August Personal Consumption Expenditures report, released Sept 30, showed headline PCE up 0.3% m/m and 3.4% y/y (vs 3.7% in July and ~3.7% expected), and core PCE up 0.2% m/m and 3.0% y/y (vs 3.3% prior and 3.3% expected). CME FedWatch moved to roughly 65% odds that the Fed holds in October versus ~35% for another 25bp hike, after the Fed's first hike in three years on Sept 16. Treasury yields fell and US equity futures rose about 0.3% on the soft print, though inflation remains well above the Fed's 2% target.