RBC Economics projects a renewed acceleration in U.S. inflation this month, driven by rising prices for imported goods, airfares and health care, and expects the Federal Reserve to keep interest rates unchanged at its Oct. 2026 meeting while signaling additional hikes remain possible.
What RBC expects and why it matters
The bank forecasts the core personal consumption expenditures (PCE) price index — the Federal Reserve’s preferred inflation measure — rose 0.4% month‑over‑month in September, pushing the year‑over‑year pace to 3.1%. RBC expects headline PCE to increase 0.5% m/m, accelerating the 12‑month rate to 3.7%.
RBC cites three main drivers for the expected reacceleration:
- Stronger-than‑expected price gains for imported goods in September, including clothing, toys and computers.
- A jump in producer prices for airfares that feeds into PCE transportation services; PPI for airfares rose 2.0% m/m versus a 1.2% m/m rise in CPI airfares.
- Healthcare costs included in PCE — notably a rise in PPI for hospital inpatient care — adding to services inflation.
Because the Fed treats PCE as its preferred gauge of underlying price pressures, RBC says the September data are likely to show a “concerning trajectory” for policymakers. Still, the analysts expect the central bank will hold rates steady at its October meeting.
Policy implications and distributional risks
RBC’s view highlights a key policy dilemma: higher interest rates are a blunt tool that cannot resolve supply shocks and can be ill‑suited to restrain demand concentrated among groups that aren’t very rate‑sensitive. The bank warns that additional rate increases, while possible, would disproportionately burden lower‑ and middle‑income households that are already carrying higher personal interest expenses and saving less.
For consumers, RBC forecasts personal spending will continue to rise, led by upper‑income households and retirees. The bank’s baseline calls for a 0.6% m/m increase in nominal personal spending for September, driven mainly by stronger services consumption and higher energy costs. After adjusting for higher prices, real personal spending is expected to show a much smaller gain — about 0.1% m/m — illustrating how inflation can erode purchasing power even when nominal spending grows.
| Series | RBC forecast (Sept.) |
|---|---|
| Core PCE (m/m) | +0.4% |
| Core PCE (y/y) | 3.1% |
| Headline PCE (m/m) | +0.5% |
| Headline PCE (y/y) | 3.7% |
| Personal spending (nominal, m/m) | +0.6% |
| Real personal spending (m/m) | +0.1% |
RBC also flags upside risks to inflation that may not be fully captured in these numbers, including energy price moves, tariff effects and lingering high freight costs that can pass through to consumer prices with a lag.
What consumers should watch next
- The Bureau of Economic Analysis personal income and spending release for September, which will include headline and core PCE figures.
- Producer price trends in transportation and healthcare, which can flow into consumer inflation measures.
- Federal Reserve communications after the October meeting for guidance on the timing of any future rate moves.
RBC’s outlook underscores that recent inflation readings and the path of monetary policy will continue to shape borrowing costs, mortgage and credit markets, and the real purchasing power of household incomes — with the heaviest burden likely falling on households with less savings and higher interest exposure.
