Another Federal Reserve rate hike is difficult to justify, Truflation Head of Data Oliver Rust told Benzinga, arguing that underlying inflation is cooling despite energy costs and tariffs. The Fed under Chair Kevin Warsh raised rates by 25 basis points to 3.75%-4.00% on Sept. 16, its first increase since 2023, as policymakers sought to prevent elevated price pressures from spreading across the economy. Rust said that broadening has not yet appeared and suggested market expectations influenced the decision because traders had largely priced in an increase. Core PCE inflation (the Federal Reserve’s preferred underlying inflation gauge) was 3.0% in August, below the 3.3% forecast, while headline PCE was 3.4% against expectations of 3.7%. However, a downward revision to July core PCE from 3.3% to 3.0% meant the annual core rate was unchanged in August. Rust argued that higher rates cannot resolve an energy supply shock linked to the Iran conflict. Polymarket traders put the chance of rates remaining unchanged in October at 64%, up from about 31% on Tuesday. Consumer spending rose 0.9% in August, while personal income increased 0.2% and the savings rate fell to 4.1%. Reuters analysis found 51% of PCE components were still increasing at annual rates above 3%, indicating price pressures remain broad. Rust called the spending surge a one-off, partly reflecting energy prices that rose about 3% month over month, and said the combination of faster spending, weak income growth and declining savings was unsustainable. He acknowledged that wealthier households benefiting from a strong stock market could continue spending, but said they were unlikely to sustain overall demand if energy prices fell and lower-income consumers reduced spending. The SPDR S&P 500 ETF Trust traded higher Wednesday, with the S&P 500 up about 0.6% by midday after the softer-than-expected inflation report.