The Personal Consumption Expenditures Price Index increased 0.2 per cent last month, data from the Labour Department on Tuesday showed. Core PCE inflation – which excludes food and energy – also increased by 0.2 per cent.
Headline inflation rose 3.3 per cent on an annual basis, up from 3.0 per cent in July. Core PCE inflation rose 4.2 per cent annually, in line with estimations from a Reuters survey of economists.
Thursday's data followed recent reports that showed signs of cooling economic pressures. A separate report from the Labour Department on Tuesday showed job openings at their lowest level in two years.
The report also showed that consumer spending surged 0.8 per cent in July, indicating that the US economy is growing at a solid pace in the third quarter.
Consumer spending drives roughly 70 per cent of the US economy, but the Fed has attempted to rein it in through its interest rate increases.
Previous readings have also shown that inflation has climbed down in recent months, but Fed chairman Jerome Powell said it was not enough evidence to suggest a sustained path to its long-term 2 per cent goal.
“The lower monthly readings for core inflation in June and July were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably towards our goal,” he said at the Jackson Hole symposium last week.
“Twelve-month core inflation is still elevated, and there is substantial further ground to cover to get back to price stability,” he said.
The US central bank closely watches PCE inflation to make its monetary policy decisions.
Traders anticipate that the Fed will leave rates unchanged at 5.25 to 5.50 per cent when officials next meet in September, data from the CME Group showed.
Mr Powell said the Fed would “proceed carefully” in its upcoming decisions, underscoring the risks the central bank faces in tightening too much or not enough.