World News | Federal Reserve's Preferred Inflation Gauge Shows Still-persistent Underlying Price Pressures

Washington, Oct 27 (AP) An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth.

Friday's report from the Commerce Department showed that prices rose 0.4 per cent from August to September, the same as the previous month. And compared with 12 months earlier, inflation was unchanged at 3.4 per cent.

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September's month-to-month price increase exceeds a pace consistent with the Fed's 2 per cent annual inflation target, and it compounds already higher costs for such necessities as rent, food and gas.

The Fed is widely expected to keep its key short-term interest rate unchanged when it meets next week. But its policymakers have flagged the risk that stronger growth could keep inflation persistently high and require further rate hikes to quell it.

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Since March 2022, the central bank has raised its key rate from near zero to roughly 5.4 per cent in a concerted drive to tame inflation. Annual inflation has tumbled from the 9.1 per cent peak it reached in June of last year.

On Thursday, the government reported that strong consumer spending drove the economy to a robust 4.9 per cent annual growth rate in the July-September quarter, the best such showing in nearly two years.

Heavy spending by consumers typically leads businesses to charge higher prices. In Friday's report on inflation, the government also said that consumer spending last month jumped a robust 0.7 per cent.

Excluding volatile food and energy costs, “core” prices increased 0.3 per cent from August to September, above the 0.1 per cent uptick the previous month. Compared with a year earlier, though, core inflation eased to 3.7 per cent, the slowest rise since May 2021 and down from 3.8 per cent in August.

A key reason why the Fed may keep rates unchanged through year's end is that September's 3.7 per cent year-over-year rise in core inflation matches the central bank's forecast for this quarter.

With core prices already at that level, Fed officials will likely believe they can "proceed carefully," as Chair Jerome Powell has said they will do, and monitor how the economy evolves in coming months. (AP)

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)