Prior was 3.3%Headline y/y 3.4% vs 3.7% expected (3.7% prior)Headline m/m +0.3% vs +0.4% expected (+0.2% prior)Core PCE (excluding food & energy):Core m/m +0.2% vs +0.3% expectedPrior +0.2%Consumer spending and income for August:Personal income +0.2% vs +0.4% expected. Prior month +0.4%Personal spending +0.9% vs +0.8% expected. Prior month +0.2%Real personal spending % vs +0.0% priorThis is a big sigh of relief for the Federal Reserve and takes away the pressure to hike rates in October. The US dollar is falling across the baord and Treasury yields are 4-5 bps lower across the curve. We're seeing bids in stocks and gold as well.October rate hike odds are down to 34%. They were 64% at the start of the week.The US dollar is down around 25 pips quickly across the board.For background, the Personal Consumption Expenditures report, commonly called the PCE report, is part of the Bureau of Economic Analysis’s monthly Personal Income and Outlays release. It provides information on household income, consumer spending and saving, alongside the PCE price index, which measures changes in the prices of goods and services consumed in the United States. Together, these figures show how much consumers are spending and how much of that change reflects higher prices rather than additional purchases.The release includes headline and core inflation measures. Headline PCE covers the full range of consumer goods and services, while core PCE excludes food and energy, whose prices can fluctuate sharply. Both are reported as monthly and annual percentage changes. The Federal Reserve defines its longer-term 2% inflation objective using headline PCE, while closely monitoring core PCE to help assess underlying price trends.PCE is frequently compared with the Consumer Price Index, or CPI, published by the Bureau of Labor Statistics. Both track consumer inflation, but their coverage and calculation methods differ. CPI focuses primarily on expenses paid directly by urban consumers. PCE has broader coverage, including spending on consumers’ behalf, such as healthcare paid for by employers or government programmes. Consequently, healthcare carries greater weight in PCE, while housing has a larger influence on CPI.Another distinction is how the indexes account for changing spending patterns. PCE updates its expenditure weights frequently and captures shifts between categories as consumers respond to changing prices. CPI also incorporates some substitution, but uses a different approach.CPI generally arrives earlier, giving it a prominent role in the monthly inflation calendar. PCE follows with a broader spending picture and can be revised as additional information becomes available. Differences between their readings are therefore expected: they measure closely related aspects of inflation, using different coverage, weights and statistical methods. This article was written by Adam Button at investinglive.com.