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Key US inflation gauge holds steady in September

WASHINGTON: A key indicator of US inflation stayed steady in September, the government reported Friday (Oct 27), as policymakers push on in their battle against persistent price increases.

The personal consumption expenditures (PCE) price index, which is the Federal Reserve’s preferred inflation gauge, rose 3.4 per cent from a year ago – the same rate as in the preceding two months – said the Commerce Department.

The data comes days before Federal Reserve policymakers gather for a two-day meeting to mull whether to raise interest rates again to combat stubborn inflation.

While consumer inflation has cooled, the latest figures remain well above officials’ 2 per cent target and could prompt further action.

Fed policymakers are due to announce their rate decision next Wednesday, with analysts generally expecting them to hold off further increases for now as the effects of earlier rate hikes ripple through the economy.

A separate report released Friday by the University of Michigan indicated consumer sentiment weakened in October, with lower expectations about business conditions and personal finances.

These reflect “ongoing concerns about inflation and, to a lesser degree, uncertainty over the implications of negative news both domestically and abroad,” the report said.

“STICKINESS”

From August to September, the core PCE price index excluding food and energy rose 0.3 per cent, up from 0.1 per cent growth in the prior month, said the Commerce Department.

From September last year, the core PCE price index rose 3.7 per cent, a touch below August’s figure.

This “reflects the stickiness of core services inflation, which is still too strong to be consistent with inflation falling back to the Fed’s 2 per cent target,” said Michael Pearce of Oxford Economics.

Meanwhile, consumption accelerated between August and September, boosted by spending on services such as international travel and on housing and health care, Commerce Department data showed.

The US economy has shown more resilience than analysts expected in the face of rapid interest rate hikes, but analysts also expect the full effect of existing hikes have yet to be felt.

For now, it appears that “inflation is coming down while growth remains robust, contrary to what many had predicted,” said White House National Economic Council Director Lael Brainard in a speech on Friday.

Rubeela Farooqi of High Frequency Economics added: “Overall, spending remains positive, and inflation is slowing, a welcome combination for policymakers.”

“We continue to expect a slower pace of growth going forward and a further easing in price pressures,” she added in a note.

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