Yearly rate of U.S. inflation climbs to 3.6%
Halloween candy costs more than ever - with persistent inflation one ingredient.
Even though the Federal Reserve temporarily put its inflation fight on hold this week, the cost of living rose sharply again last month in a sign that the central bank's work is far from done.
The Fed's preferred inflation barometer, known as the PCE index, jumped 0.5% in September to mark the biggest increase in six months.
The yearly rate of inflation also climbed to 3.6% from 3.4% in the prior month, the PCE gauge showed, pushing inflation further away from the Fed's 2% target. The PCE inflation measure is formally known as the index of personal consumption expenditures.
Even with inflation biting at the economy's heels, the Fed on Wednesday paused further interest-rate increases at least until top officials meet again in December. The Fed raised rates in September and is expected to do so again in the effort to rein in inflation.
Higher borrowing costs are a time-tested means to reduce the rate of inflation, though usually at the expense of economic growth.
The economy, however, has shown little sign of slowing. Gross domestic product, the official scorecard of the economy, rose at a 3.4% annual pace in the third quarter, the government said in a separate report.
Key details: The so-called core PCE index rose a slower but still worrisome 0.3% in September, matched the forecast of economists surveyed by the Wall Street Journal.
The yearly rate of core inflation edged up to 3.1% from 3.0%.
The core PCE rate omits food and energy is considered by the Fed to be the most reliable predictor of future inflation. It's still far too high for the sake of the economy.
Big picture: Rising inflation this year has been fueled by higher oil prices tied to the Iran war and the lingering effects of U.S. tariffs.
Inflation is expected to slow next year, but it's unclear to what extent. As long as oil prices are high, the economy won't get much price relief.
If inflation persists, however, the Fed will have to raise interest rates even higher and potentially choke off prospects for economic growth.
Looking ahead: "This economy is roaring and inflation is picking up as a result," said FHN Financial chief economist Chris Low, who argued the Fed should have raised interest rates this week.
Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX fell in Thursday trades.
-Jeffry Bartash
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