US Inflation Exceeds Fed Target as Q3 GDP Surges to 3.4%
US inflation accelerated in September with the annual PCE rate at 3.6%, while third-quarter GDP grew at a stronger-than-expected annualized rate of 3.4%.
US inflation accelerated in September, remaining well above the Federal Reserve's target, while the economy expanded faster than expected in the third quarter, according to a Commerce Department report released today. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 0.5% in September, bringing the annual inflation rate to 3.6%. The monthly increase matched Dow Jones consensus estimates, while the annual rate came in 0.1 percentage point below expectations. Excluding food and energy, the core PCE index registered a 0.3% monthly gain and a 3.1% annual increase, matching forecasts.
While inflation continues to run above the Fed's 2% target, the Commerce Department also reported strong third-quarter gross domestic product (GDP) growth. GDP expanded at an annualized rate of 3.4%, topping the 3.1% estimate and significantly outpacing the 2.2% growth recorded in the second quarter. These reports follow the Federal Reserve's decision to maintain its benchmark interest rate in the 3.75%-4% range.
Despite elevated inflation readings, central bank officials maintain they can afford to evaluate incoming data before determining their next move. "The period ahead is rich in data. A lot is happening around the world, and my colleagues and I on the board are eager to pay attention to them," said Fed Chair Kevin Warsh. Nevertheless, Thursday's data deluge suggests the central bank may still face substantial work ahead in reining in price pressures.
