WASHINGTON, Oct 28 (Reuters) - U.S. consumer spending increased more than expected in September, while underlying inflation pressures continued to bubble, keeping the Federal Reserve on track to hike interest rates by 75 basis points for the fourth time this year.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month, the Commerce Department said on Friday. Data for August was revised higher to show spending increasing 0.6% instead of 0.4% as previously reported. Economists polled by Reuters had forecast consumer spending gaining 0.4%.
The data was included in Thursday's advance third-quarter gross domestic product report, which showed economic growth rebounding after contracting in the first half of the year.
Last quarter's 2.6% annualized growth pace was largely driven by a sharp narrowing in the trade deficit.
Growth in consumer spending slowed to a 1.4% rate from the April-June quarter's 2.0% pace. Domestic demand last quarter was the softest in two years.
The Fed has raised its benchmark overnight interest rate from near zero in March to the current range of 3.00% to 3.25%, the swiftest pace of policy tightening in a generation or more.
Cooling demand has left some economists anticipating that the U.S. central bank could signal slower rate hikes at its policy meeting next Tuesday and Wednesday, though much would depend on inflation, which remains stubbornly high.
The personal consumption expenditures (PCE) price index rose 0.3% last month after a similar gain in August. In the 12 months through September, the PCE price index increased 6.2%, matching August's rise.
Excluding the volatile food and energy components, the PCE price index climbed 0.5% after increasing by the same margin in August. The so-called core PCE price index advanced 5.1% on a year-on-year basis in September after increasing 4.9% in August.
The Fed tracks the PCE price indexes for its 2% inflation target. Other inflation measures are running much higher. The consumer price index increased 8.2% year-on-year in September.
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