US inflation cools to 3.4% in August, below forecasts

US inflation rose less than expected in August, with the PCE price index up 3.4% annually, below the 3.7% forecast, though still well above the Federal Reserve's 2% target. Core PCE also came in lower than anticipated at 3% annually. The Commerce Department reported monthly PCE rose 0.3% and core PCE 0.2%, both matching or beating expectations. Energy prices, including a 4.4% rise in gasoline, drove much of the increase. Consumer spending remained strong, rising 0.9%, while personal income grew 0.2%. Separate data showed the US economy grew at a 2.2% annualized rate in the second quarter, revised up from 1.5%. Private payrolls added 90,000 jobs in September, exceeding forecasts. Markets initially rallied on the data, with Treasury yields pulling back from recent highs.