Fed’s Preferred Inflation Measure Shows Continued Decline in September Price Growth

The Commerce Department’s latest report showed that inflation continued its gradual decline in September, with the Federal Reserve’s preferred measure, the Personal Consumption Expenditures (PCE) index, aligning closely with economists’ expectations, FOX Business reports.

The PCE index, a critical measure for Fed policymakers, rose 0.2% in September and showed a 2.1% increase year-over-year, down from 2.3% in August. This pace brings the PCE index closer to the Fed’s 2% target, providing further evidence that inflation may be cooling.

Core PCE, which excludes food and energy prices to provide a clearer picture of inflation trends, rose by 0.3% month-over-month, showing a 2.7% increase year-over-year. While the Fed places significant focus on the headline PCE for its target, the core PCE is often viewed as a more reliable indicator of underlying inflation trends, given its stability amid volatile food and energy costs.

The report also detailed price changes in various sectors. Goods prices fell 1.2% compared to the same month last year, while service prices rose by 3.7%. Food prices increased modestly by 1.2%, and energy costs dropped sharply, down 8.1% from last year.

Meanwhile, wages saw a 0.5% monthly increase in September, consistent with the growth rate in August. While wage increases were higher earlier in the year, including a peak of 1.1% in February, recent figures suggest wage growth is stabilizing.