Inflation in the United States maintained its elevated trajectory throughout September, despite robust consumer spending and a thriving economic landscape. According to the US Commerce Department’s report on Friday, the closely-watched Personal Consumption Expenditures Price Index (PCE) surged by 0.4% on a month-on-month basis, mirroring the previous month’s increase. On a year-on-year scale, the rate held steady from August, standing at 3.4%. These figures surpass the Federal Reserve’s targeted inflation rate of 2%.
The already escalated costs for essential commodities like rent, food, and fuel have been further compounded by these heightened inflation levels. The prices of crucial goods and services have been on a steady rise since March 2022, when the Federal Reserve initiated a series of hikes in its short-term interest rates, elevating it from near-zero to approximately 5.4%. This strategic move was aimed at curbing the annual inflation rate, which had surged to a peak of 9.1% in June of the preceding year.
The prevalence of high inflation endures despite the United States’ commendable consumer spending and the robust economic performance in the third quarter of this year. In a report released on Thursday, the US government revealed that consumer spending propelled the nation to a formidable 4.9% year-on-year growth rate in the July-September quarter, marking the most impressive quarterly performance in nearly two years. This figure surpasses the preceding month’s consumer spending increase of 0.7% on a month-on-month basis.
Excluding the volatile food and energy sectors, the government’s inflation data indicates that “core” prices experienced a 0.3% surge from August to September, surpassing the 0.1% upswing observed the previous month. However, on a yearly basis, core inflation moderated to 3.7%, marking the most sluggish rise since May of 2021 and a decline from the 3.8% recorded in August. This aligns with the Federal Reserve’s earlier quarter forecast, implying that the Fed may not further adjust interest rates at this juncture, instead adopting a prudent approach while closely monitoring forthcoming economic developments.
The Federal Reserve is anticipated to maintain its existing key interest rate when it convenes next week. Nonetheless, policymakers have emphasized the ongoing risk posed by escalating inflation and robust economic growth, which could potentially trigger additional rate hikes. In sum, September’s inflation data underscores the pivotal role of strong consumer spending in propelling US economic growth, even as inflation maintains its elevated status. The Fed is poised to adopt a watchful stance on further rate adjustments, proceeding with circumspection as they vigilantly monitor forthcoming economic developments.
Source: AP News
