Inflation Trends Likely to Keep Fed Rate-Hike Pause on Track

The Federal Reserve’s favorite inflation measure is estimated to show that price pressures picked up modestly last month amid a surge in economic growth, a strong labor market and a consumer spending splurge. 

• Moderately higher inflation in September would keep Fed officials on track to hold interest rates steady at its Oct. 31-Nov. 1 policy meeting. They are closely watching underlying price trends to gauge whether they have raised short-term interest rates enough to slow the economy and tame inflation.

• Economists surveyed by The Wall Street Journal estimate the Commerce Department’s core personal-consumption expenditures price index, which excludes volatile food and energy prices, increased a modest 0.3% in September from the prior month, after a 0.1% rise in August. From a year earlier, they estimate prices rose 3.7% last month, compared with 3.9% in August and 5.6% in February 2022, which was a recent peak. 

• Underlying inflation remains elevated but has cooled significantly as the Fed over the past 20 months has raised interest rates at the fastest pace in four decades. A separate Commerce Department report on Thursday showed core prices rose an annualized 2.4% in the third quarter, only modestly above the Fed’s 2% inflation target.

• The Commerce Department will release the September inflation figures, along with household income, spending and saving data, at 8:30 a.m. Eastern time Friday.

Has recent inflation progress stalled?

Inflation is well below the 40-year peak reached last year. That cooling progress recently stalled, however, indicating the Fed can’t yet declare victory.