The persistence of underlying inflation was once again a central theme in September. This indicator, key to assessing the real trend of prices, remained above the Federal Reserve's (Fed) target. This comes just before the central bank's monetary policy meeting next week. The Commerce Department reported that the Personal Consumption Expenditures (PCE) index rose 0.3% from August and is 2.8% above its level a year ago. These figures matched some economists' forecasts. The overall PCE remained stable compared to the previous day, while the core PCE showed a slight cooling. The PCE index is known as the core inflation indicator, favored by Fed officials for analysis after it excludes volatile food and energy categories. The annual figure was slightly more moderate than that observed in August. Even so, the indicator remains far from the 2% target the Federal Reserve is pursuing to restore price stability. The figures reveal different behaviors by type of goods. Goods prices rose 1.4% compared to September of last year. This represented a significant acceleration compared to the 0.9% in August and the 0.6% observed in both June and July. Durable goods grew 0.9% year-on-year. This figure was lower than the 1.2% reported a month earlier. In contrast, non-durable goods rebounded strongly, rising 1.7% year-on-year, after a weak 0.7% in August. Services continue to be the hottest component. Their prices increased 3.4% in September compared to the previous year. This marked a slight cooling compared to the 3.6% observed in August. Despite this, services continue to drive a significant portion of the inflationary pressure. The pace of household savings remained unchanged. The personal savings rate remained at 4.7% of disposable income. This stagnation reflects that, despite high inflation, consumption patterns remain stable.

“PCE inflation is still significantly above the Fed’s 2% target, but it is no longer accelerating,” said Michael Pearce, chief economist at Oxford Economics. “We expect inflation to remain close to 3% in the coming quarters. However, once the one-off increase in goods prices resulting from tariffs ceases to have an effect, underlying trends suggest that inflation will moderate to near 2%, though still above, by the end of 2026.” The market is betting on an 87% probability of a 25-basis-point cut in the benchmark interest rate, according to CME FedWatch. Participants expect the range to be between 3.5% and 3.75%. A month ago, that probability was 62%. However, the minutes from the Fed’s last meeting showed internal differences. Some officials do not consider another cut necessary in December because of the risk of persistent inflation and signs of cooling labor market activity. The September report was weeks late due to the 43-day government shutdown, the longest in the country’s history. So far, the Bureau of Economic Analysis has not confirmed the report’s release date. October. The one for November is scheduled for December 19.

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