US Inflation Accelerates in September, Raising Odds of Rate Hike

12:02 PM EDT, 10/29/2026 (MT Newswires) -- The Federal Reserve's preferred inflation gauge accelerated in September, government data showed Thursday, increasing the odds of a rate hike by the end of the year, economists said. The headline personal consumption expenditure price index rose 3.6% year over year last month, following a 3.4% gain in August, the Bureau of Economic Analysis reported. The core measure, which excludes food and energy, increased to 3.1% in September from 3% the month before. Both metrics matched the consensus in a Bloomberg-compiled survey for September. "Alongside firm economic activity, this renewed inflation momentum keeps another (Federal Reserve) rate hike in December firmly on the table," TD Economics Economist Ksenia Bushmeneva said in a note. The Fed held its benchmark lending rate steady on Wednesday, following last month's 25-basis-point increase, in a divided decision as the central bank preferred to wait for fresh data before deciding its next move. "Inflation remains elevated," the Federal Open Market Committee said in its Wednesday statement. "The accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the committee's 2% goal." Markets are currently pricing in an 80% probability that the FOMC will hike rates by 25 basis points at its next meeting in December, with the remaining odds in favor of another pause, according to the CME FedWatch tool. High gasoline prices are propping up headline inflation, but price pressures are also spreading beyond energy, with core inflation picking up again after easing over the summer as both goods and services costs rose, Bushmeneva said. US retail gasoline prices averaged $4.2258 per gallon Thursday, compared with $3.0384 a year ago, according to data from AAA, a motoring and leisure travel membership organization that tracks fuel prices in the US. Diesel prices -- which surged to a record-high average of $6.5276 on Sept. 22 -- averaged $6.3347 Thursday, AAA data showed. On a monthly basis, headline inflation accelerated to 0.5% from 0.3%, while core inflation held steady at 0.3% in September, as projected by the Street for each metric. Personal consumption expenditure decelerated to 0.5% last month from 0.9% in August, official data showed. The Street was looking for growth of 0.6%. After adjusting for inflation, real PCE was flat, compared with analyst estimates for a 0.1% gain. Higher prices, especially for gasoline, accounted for the entire increase in nominal spending, Bushmeneva said. Personal income rose 0.2%, below the 0.3% consensus, while real disposable income fell 0.3% after a flat August. The personal saving rate slipped to 3.8% from 4%, which TD said was its lowest level in four years.