Fed path shaped by firm inflation – Societe Generale

Societe Generale's Jan Groen examined the August US inflation and growth data, revealing that Core PCE was weaker than anticipated. While the benchmark revisions lowered the measured inflation, it still remained above levels considered consistent with the Federal Reserve's target. Stronger consumption and GDP revisions indicated that the US economy entered the second half of 2026 with more momentum, which could potentially allow for an October rate hike.

Despite August's Core PCE undershooting expectations, it was the underlying price pressures in services that proved even less reassuring, signaling that inflation remained firm. Revisions pointed to a higher underlying inflation over the past year, which continues to exceed the Fed's target levels.