Underlying inflation rose more than expected for a second straight month in September, strengthening the case for one more interest-rate increase this year that nearly all Federal Reserve officials penciled in when they voted unanimously to raise rates last month.
Core consumer prices, which exclude food and energy, rose 0.33% in September, above nearly every forecast from Wall Street economists, after climbing 0.29% in August.
The report raises two questions for officials. The more immediate one is whether they can afford to wait until December to raise rates again after signaling recently that they didn't anticipate moving at their meeting in two weeks. Some analysts have argued that there is little reason for the Fed to wait if officials expect to raise rates anyway, though officials haven't given any sign that one report would lead them to reconsider.
The bigger question is how high rates ultimately need to go. That depends on whether pressures from higher energy prices and the AI investment boom are spreading into the broader economy.
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