The Problem: Media Claims vs. Actual Data
Major outlets, including Yahoo Finance, reported that September’s Personal Consumption
Expenditures (PCE) reading “showed inflation moderating.”
This is presented as evidence that the market is right to expect imminent rate cuts.
The issue is simple: the claim is scientifically false when compared to the official
data from the Bureau of Economic Analysis (BEA). The PCE index did not moderate in
September. It slightly increased.
What the BEA Data Actually Shows
Using BEA Table 2.8.4 (Price Index for Personal Consumption Expenditures):
- September 2025 PCE Index: 127.625
- September 2024 PCE Index: 124.164
- Year-over-Year Change: +2.787%
Now compare that with the previous months:
- August 2025 Y/Y: +2.74%
- July 2025 Y/Y: +2.602%
Scientific conclusion:
Inflation has not moderated. It has slightly increased within a tight band
of approximately 2.60%–2.80%. This is stability, not moderation.
Compare with CPI: A Higher, Still Unresolved Inflation Level
The CPI for September 2025 shows a year-over-year increase of 3.01%, confirming that
consumer inflation pressures remain above PCE’s rate.
Both measures are:
- Above the Fed’s formal 2% target
- Above the informal historic tolerance of 2.5% (2011 benchmark)
Therefore, headlines implying victory over inflation are premature and
analytically unsupported.
Why October CPI May Tick Higher: A Mathematical Base Effect
The media ignores basic mathematics behind year-over-year inflation comparisons.
For CPI (Oct 2025), the comparison base from October 2024 increased by only 0.115% from
the prior month.
If monthly inflation in October 2025 rises by more than 0.115%, the
CPI Y/Y must mathematically increase.
This is not economics — it’s arithmetic.
Why the PCE Index Does Not Show the Same October Pressure
The PCE index for October 2024 rose a much larger 0.266% from the previous month.
That means the October 2025 PCE release will likely show:
- A stable or slightly declining Y/Y number
- No base effect upward pressure
This again highlights why the claim that inflation is “moderating” is not supported by the underlying
structure of the index.
Scientific Summary
- PCE inflation has not moderated — it slightly increased from 2.602% to 2.787%.
- CPI remains higher at 3.01%, demonstrating persistent inflation pressure.
- Fed targets remain unmet: 2% remains distant; even 2.5% (2011) is not achieved.
- Base effects guarantee the possibility of a CPI uptick in October.
- PCE’s structure avoids this due to a higher October 2024 monthly base.
The media narrative — “inflation is moderating” — is therefore
factually incorrect and scientifically unsupported.