The Federal Reserve's preferred inflation measure ticked higher in September, reversing a brief cooling in August, according to data released Thursday by the Bureau of Economic Analysis.
The personal consumption expenditures (PCE) price index rose 0.5% last month, and was up 3.6% compared with a year earlier. That follows a 0.4% monthly increase in August and an annual rate that had dipped to 3.4%.
The Cleveland Fed's nowcast had projected exactly those figures, signaling that the uptick was largely anticipated by economists and policymakers.
Energy prices were the primary driver, with gasoline and other energy goods jumping 9.2% from August to September, after a 4.4% rise the prior month. This marks the sixth monthly increase in energy costs this year, as the ongoing conflict with Iran has disrupted shipping through the Strait of Hormuz, a critical chokepoint for global oil supplies.
Inflation has now remained above the Fed's 2% target for five and a half years. That persistent pressure prompted the central bank to implement a quarter-point rate hike in mid-September. However, at their meeting on Wednesday, the Federal Open Market Committee voted 10-2 to hold the benchmark rate at its current range of 3.75% to 4%.
Fed Chair Kevin Warsh, speaking after the decision, indicated that the weeks leading up to the next FOMC meeting in early December would offer "more clarity" on the appropriate path for monetary policy. He cautioned against drawing firm conclusions from the latest data.
"What we've done in this monetary medicine, it's starting to work some, but there's no firm conclusions," Warsh said. "If we had a firm conclusion about the conduct of monetary policy, we'd announce it to much fanfare today."
The decision to hold rates comes as the central bank navigates a delicate balance between curbing inflation and avoiding an economic slowdown. Some analysts argue that the recent energy-driven price spikes could complicate the Fed's efforts, while others point to signs of easing in core inflation.
In related news, the Fed's stance has drawn attention amid broader political and legal developments. For instance, the Fed's decision to hold rates was not unanimous, with two dissenters favoring additional action. Meanwhile, the Fed's timing ahead of the election has been scrutinized, as the central bank seeks to maintain its independence.
As the Fed waits for more data, the energy market remains a wildcard. The conflict in the Middle East continues to threaten supply routes, and any further disruptions could push inflation higher, forcing the Fed to reconsider its pause.
