Inflation in the United States rose again in September, reinforcing the rationale for the Federal Reserve to consider an interest rate hike at its December meeting, following its decision to keep rates unchanged this week.
The Personal Consumption Expenditures (PCE) price index—the Fed’s preferred gauge of inflation—climbed 0.5% month-on-month in September and rose 3.6% compared to the same period last year. These figures confirm that price pressures remain well above the Fed’s 2% inflation target.
Meanwhile, the Core PCE, which excludes food and energy components, increased 3.1% year-on-year. On a monthly basis, the Core PCE rose 0.3%, matching the increase recorded in August.
This inflation data was released a day after Fed officials voted 10-2 to maintain interest rates. Two officials favored a rate hike, while the market continues to anticipate the possibility of another increase at the final meeting of the year in December.
Inflationary pressures this year have been partly fueled by an energy crisis stemming from a conflict involving Iran, which disrupted energy flows through the Strait of Hormuz and caused oil prices to surge. Fed official Kevin Warsh noted that the US economy remains robust, though he acknowledged that inflation persists at high levels. This situation provides the Fed with the space to gather more data before determining its next policy move. (CP)