US inflation rises to 3.6% in September, strengthening bets on Fed rate hike in December

US inflation rose in September as consumers paid more for gasoline and other goods. The rise strengthened economists' expectations that the Federal Reserve (Fed) could increase interest rates in December. US inflation rose to 3.6% in September, increasing expectations of a Fed rate hike in December.

(Pexel/Representative image) (Pexel)The Personal Consumption Expenditures (PCE) Price Index, which measures changes in the prices of goods and services, increased by 0.5% in September. It had risen by 0.3% in August. The September increase was in line with economists' expectations, according to the Commerce Department's Bureau of Economic Analysis (BEA), as noted by Reuters.

US PCE inflation rose by 3.6% in the 12 months through September, up from 3.4% in August. This was higher than the Federal Reserve's 2% inflation target. Core PCE inflation, which does not include food and energy prices because they can change quickly, rose by 0.3% in September.

It also increased by 0.3% in August. The August figure was revised up from the earlier estimate of 0.2%, according to the Bureau of Economic Analysis (BEA). Core PCE inflation rose by 3.1% in the 12 months through September, compared with 3.0% in August.

This measure is closely watched because it excludes the often-unstable prices of food and energy. The Federal Reserve left its benchmark interest rate unchanged at 3.75%-4.00% on Wednesday. However, the central bank acknowledged that inflation remained high, according to Reuters' report on the Fed's October meeting.

Fed Chairman Kevin Warsh said energy prices and related costs had increased again in recent weeks. He said the central bank needed to ensure that price increases in some sectors did not spread across the wider economy. He also stressed the importance of keeping inflation expectations under control, according to Reuters.

Financial markets were pricing in an 84.6% chance of a Federal Reserve interest rate increase in December, according to CME Group's FedWatch Tool. The higher-than-target inflation rate strengthened expectations of another rate hike.

The inflation figures were included in the government's advance report on gross domestic product (GDP) for the July-September quarter. The report showed that the US economy grew at an annualised rate of 3.4% during the quarter, according to Reuters.

US consumer spending rose by 0.5% in September, following a 0.9% increase in August. Consumer spending accounts for more than two-thirds of US economic activity, making it an important measure of the economy's strength. The increase in consumer spending partly reflected higher prices paid by households.

After adjusting for inflation, consumer spending remained unchanged in September, suggesting that households did not increase the amount they purchased overall, according to Reuters. Despite the monthly slowdown, consumer spending increased at an annualised rate of 3.8% during the July-September quarter.

However, inflation-adjusted spending was flat in September, pointing to weaker momentum as the US economy entered the fourth quarter, according to the BEA. Durva More is a Senior Content Producer at Hindustan Times, where she covers finance, and global news.

She brings experience across digital and television journalism, with a strong focus on breaking news, business reporting, and international affairs. Before joining Hindustan Times, Durva worked as an International News Writer at The Economic Times, covering a diverse range of subjects including global politics, business, sports, entertainment, and major world events.

She also worked as a Business Reporter with NDTV Profit. A postgraduate diploma holder in Journalism from the Asian College of Journalism, Durva is passionate about field reporting and storytelling. She thrives on the adrenaline of chasing stories, speaking with people from different walks of life, and amplifying voices that deserve to be heard.

Her reporting is driven by curiosity, accuracy, and a commitment to making complex subjects accessible to readers. When she is not chasing stories or covering breaking news, Durva enjoys reading books and painting. She loves exploring new ideas, meeting people, and learning about different perspectives.

For her, both journalism and art are ways to understand the world and tell stories that matter.Read More