U.S. inflation accelerated in September while economic growth strengthened, adding pressure to the Federal Reserve as households continue to face elevated prices. The Commerce Department reported Thursday, Oct. 29, that its personal consumption expenditures price index rose 3.6% from a year earlier, compared with 3.4% in August.
The index, known as the PCE price index, measures changes in the prices consumers pay for goods and services. The Federal Reserve watches it more closely than the better-known consumer price index because it gives less weight to housing costs and accounts for changes in what consumers buy.
Monthly price growth also picked up
Prices increased 0.5% from August to September, up from a 0.3% monthly gain in August. It was the largest monthly increase since May. The data arrived less than a week before the Nov. 3 midterm elections, in which affordability and the cost of living have become major issues.
Inflation excluding food and energy also moved higher. Core prices increased 3.1% over the year in September, compared with 3% in August. On a monthly basis, core prices rose 0.3%, matching the August increase.
| Measure | August | September |
|---|---|---|
| Overall PCE inflation, annual | 3.4% | 3.6% |
| Overall PCE inflation, monthly | 0.3% | 0.5% |
| Core PCE inflation, annual | 3% | 3.1% |
| Core PCE inflation, monthly | 0.3% | 0.3% |
Energy costs have added to the renewed increase in annual inflation. U.S. oil prices remain above $100 a barrel, compared with less than $70 before the Iran war, according to the report. Gasoline now averages about $4.25 a gallon nationwide, compared with President Donald Trump’s 2024 campaign promise to bring the price below $2 a gallon.
The inflation report followed the Federal Reserve’s decision on Wednesday to leave its key interest rate unchanged. With inflation still above the Fed’s 2% target and economic activity strengthening, the central bank faces pressure over whether to raise rates at its next meeting in December. Higher rates generally make borrowing more expensive, affecting consumers seeking mortgages, auto loans, credit cards and other forms of credit.
Growth accelerated in the third quarter
Separate Commerce Department data showed that the U.S. economy expanded at a 3.4% annual rate from July through September. That was faster than the 2.2% growth rate recorded in the April-to-June quarter.
Consumer spending jumped during the third quarter, while business investment also increased. Spending on artificial intelligence infrastructure helped fuel the rise in investment. The combination of stronger growth and inflation above the Fed’s goal complicates the central bank’s task as it weighs how to balance price stability against economic activity.
- Annual PCE inflation rose to 3.6% in September from 3.4% in August.
- Core inflation, excluding food and energy, increased to 3.1% annually.
- The economy grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second quarter.
