Inflation in the US, as measured by the Personal Consumption Expenditures (PCE) Price Index, stayed unchanged at 6.2% on a yearly basis in September, the US Bureau of Economic Analysis announced on Friday.
The Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, rose by .2% in September to 5.1% on a yearly basis, from 4.9% in August. There was some good news, however. This was less than expected. Analysts estimated that the Core PCE Index for September was going to rise to 5.2%.
“Price pressures stayed elevated in September,” senior economist Lydia Boussour of EY Parthenon said to clients in a note. “This data confirm the Federal Reserve has more work to do to cool demand and reduce inflation and keep policymakers on track to raise the federal funds rate by another 75 basis points at [their] meeting next week.”
The data also shows that personal spending was up .6% in September while personal income only rose by .4%.
Another measure of inflation that omits volatile food and energy costs rose a sharp 0.5% last month.
The PCE Price Index is the gauge that the Fed prefers to use to determine things like interest rate hikes. While the latest data does show some signs that inflation is slowing down, it also shows that core inflation continues to rise and that the Fed will likely need to continue to raise rates, at least through the end of 2022.
The Fed will meet next week where they will likely announce another .75 point rate hike, which would be the 4th consecutive .75 hike in a row.
Markets are predicting that the Fed might slow the pace of its rate hikes ahead beginning in December. Futures pricing Friday morning indicated a 60% chance that the central bank will increase rates 0.5 points in December, instead of .75, but depending on economic data released in November, that can change quickly.
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