Inflation Report Breakdown: Latest CPI and PCE Numbers Explained

October 13, 2026 | ATN Trade & Finance

The most recent published inflation data — August CPI and August PCE — show a split picture: headline inflation is being pushed up by energy, while the underlying measures that the Fed watches most closely are running cooler than expected. The September CPI report releases tomorrow, October 14 at 8:30 a.m. ET, and forecasts call for the headline to tick up.

August CPI: Headline Held at 3.4%, Energy Doing Most of the Work

The Bureau of Labor Statistics reported August CPI at 3.4% year-over-year, unchanged from July. On a monthly basis, prices rose 0.4%. The category breakdown is where the story gets interesting:

Energy was the dominant driver, up 16.3% year-over-year, with gasoline alone rising 3.9% in August. Strip energy out, and the picture is considerably calmer. Core CPI — the measure excluding food and energy — came in at 2.4% year-over-year, down from 2.5% in July, the lowest core reading in years.

Shelter remained sticky but is decelerating: rent of primary residence rose 2.7% year-over-year, owners' equivalent rent rose 3.1%, and the combined shelter index was up 3.0% — down meaningfully from its 2024 peaks. Food rose 2.7% overall, split between groceries at 2.2% and meals away from home at 3.4%. Airline fares continued to surge at +23.4% year-over-year, while used cars fell 2.3% and motor vehicle insurance dropped 5.1%.

August PCE: Softer Than Expected — and a Methodology Twist

The Federal Reserve's preferred inflation gauge, released September 30, told an even softer story. Headline PCE rose 3.4% year-over-year in August, below the 3.7% consensus. Core PCE — the Fed's single most-watched number — came in at 3.0% year-over-year, well below the 3.3% expected and down from 3.3% in July. Month-over-month, core PCE rose just 0.2% against a 0.3% forecast.

Part of the cooldown has an asterisk: the Bureau of Economic Analysis revised its methodology for calculating computer software, legal services, and investment advice prices, retroactive to 2021. Capital Economics estimated the revisions alone lowered core PCE by roughly 0.3 percentage points. Even accounting for that, the August PCE came in below expectations on the underlying trend.

September CPI Preview: Energy Poised to Push Headline Higher

The September CPI report, due October 14, is expected to show a headline acceleration. The Bloomberg consensus has headline CPI at 0.6% month-over-month and 3.6% year-over-year, driven largely by gasoline: the EIA's September average was roughly $4.36 per gallon, up 7.3% from August — enough to add an estimated 0.28 percentage points to headline CPI on its own. Core CPI is expected to remain contained at 0.2% month-over-month and 2.5% year-over-year.

What the Fed Is Watching

The Fed hiked on September 16 to 3.75–4.00% and most officials have signaled another hike is likely before year-end — with December the consensus timing. New York Fed President John Williams described "no need for urgency" on the next move. Markets are currently pricing approximately 80% odds of a hold at October 27–28, making the September CPI print a potential swing factor. An upside core surprise tomorrow could reopen the October debate; a number in line with the 2.5% forecast keeps December as the operative date. Kiplinger projects year-end headline CPI at 4.0% and core at 2.7% — still far above the Fed's 2% target.

What this means for businesses: The two-speed inflation story — elevated headline from oil, contained core from goods disinflation and shelter deceleration — is good news for long-run price expectations but offers little comfort to anyone buying fuel or flying. Importers exposed to energy-intensive logistics should note that the September gasoline spike will feed through to October freight costs before the OPEC+ supply math has time to work lower.

Sources:

Inflation Report Breakdown: Latest CPI and PCE Numbers Explained

Inflation Report Breakdown: Latest CPI and PCE Numbers Explained

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