Halloween candy is on sale at a Harris Teeter grocery store on October 17, 2022 in Washington, DC.
Drew Anger | Getty Images
An economic gauge that the Federal Reserve closely follows showed inflation remained strong in September but mostly within expectations, the Bureau of Economic Analysis reported on Friday.
The price index for basic personal consumption expenditure rose 0.5% from the previous month and accelerated 5.1% over the past 12 months, according to the report. The monthly gain was in line with Dow Jones estimates, while the yearly increase was slightly below the forecast of 5.2%.
Including food and energy, PCE inflation rose 0.3% for the month and 6.2% on an annual basis, similar to August.
The report comes as the Fed is set to enact its sixth interest rate hike of the year at its policy meeting next week. In an effort to fight inflation at its fastest pace in nearly 40 years, the Fed has hiked rates, with increases totaling 3 percentage points so far.
Markets widely expect the Fed to enact its fourth consecutive 0.75 percentage point hike at the meeting, but may slow the pace of the hikes thereafter.
The BEA also reported that personal income rose 0.4% in September, a tenth of a percentage point above the estimate. Expenditure as measured by personal consumption expenditure rose 0.6%, more than the estimate of 0.4%.
However, once adjusted for inflation, spending only increased by 0.3%. Personal disposable income, or what’s left after taxes and other charges, rose 0.4% on the month, but was flat on an inflation-adjusted basis.
The personal savings rate, which measures savings as a proportion of disposable income, came in at 3.1% for the month, down from 3.4% in August.
A separate release on Friday showed employment costs rose 1.2% for the third quarter, in line with estimates, according to the Bureau of Labor Statistics. On an annual basis, the labor cost index rose 5%, slightly below the 5.1% pace recorded in the second quarter.
Fed officials are watching Friday’s data points closely for clues about the direction of costs, especially with a tight labor market in which there are 1.7 jobs for every available worker, according to recent data. of the BLS.
The Fed prefers the PCE price reading to the more widely tracked BLS consumer price index. The BEA measure adjusts for consumer behavior, particularly the substitution of cheaper goods, to determine increases in the cost of living rather than just price movements.
Markets believe the Fed may slow the pace of its upcoming rate hikes. Futures prices on Friday morning indicated a nearly 60% chance that the central bank would raise rates by 0.5 percentage points in December.
Correction: A separate release on Friday showed employment costs rose 1.2% for the third quarter, according to the Bureau of Labor Statistics. An earlier version incorrectly indicated the day.