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US inflation heats up in September; consumer spending rises

By · Published by Everything Blog

In short

The Personal Consumption Expenditures Price Index showed sustained upward pressure, with the core gauge reaching a 3.1% annual rate that remains above the central bank's comfort zone. Although headline consumer expenditure increased during September, inflation-adjusted spending was entirely flat, pointing to a potential slowdown ahead. The Federal Reserve maintained its current rate band but cautioned against escalating price expectations, leading traders to anticipate additional monetary tightening in December.

Key points

  • Flat inflation-adjusted spending suggests real consumer momentum is losing traction enter…: Flat inflation-adjusted spending suggests real consumer momentum is losing traction entering the final quarter.
  • Persistent price pressures continue to challenge the Federal Reserve's target of 2% annua…: Persistent price pressures continue to challenge the Federal Reserve's target of 2% annual inflation.
  • Markets see an 84.6% probability that the central bank will hike interest rates this Dece…: Markets see an 84.6% probability that the central bank will hike interest rates this December.

Sources checked by our analysis pipeline: 1

The Personal Consumption Expenditures Price Index climbed 0.5% last month after an unrevised 0.3% rise in August, the Commerce Department's Bureau of Economic Analysis said on Thursday. The increase was in line with economists' expectations. In the 12 months through September, PCE inflation advanced 3.6% after an unrevised 3.4% rise in August.

The data was included in the government's advance gross domestic product report for the third quarter, which showed the economy growing at a 3.4% annualized rate during that period.

Excluding the volatile food and energy components, the PCE Price Index rose 0.3% over the month after an upwardly revised 0.3% gain in August.The so-called core PCE inflation was previously estimated to have climbed 0.2% in August.

Core PCE inflation increased 3.1% year-on-year in September after an unrevised 3.0% rise in August.

The US central bank tracks the PCE price measures for its 2% inflation target. The Fed on Wednesday left its benchmark interest rate in the current 3.75%-4.00% range while acknowledging that inflation "remains elevated."

Fed Chairman Kevin Warsh told reporters that "energy and related prices have moved…

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