Softer inflation data lowers odds of Fed October rate hike

A softer-than-expected inflation report has reduced trader expectations of a Federal Reserve rate hike in October to roughly 35%, down from about 45%, boosting Wall Street's main indexes on Wednesday. The Commerce Department reported the personal consumption expenditures price index rose 3.4% annually in August, below the 3.7% economists predicted. Separate data showed solid second-quarter GDP growth, driven by consumer spending and AI-related business investment. The Fed faces pressure from the White House to cut rates after raising them earlier this month for the first time since 2023. Inflation remains a top voter issue ahead of midterm elections, with Donald Trump receiving poor economic approval marks.