Inflation rose slightly in September, moving closer to the Federal Reserve's target, according to a Commerce Department report Thursday.
The private consumption expenditure price index posted a seasonally adjusted increase of 0.2% for the month, with 12-month inflation coming in at 2.1%, both in line with Dow Jones estimates. The Fed uses the PCE reading as its primary indicator of inflation, although policymakers also consider a number of other indicators.
Fed officials are targeting an annual inflation rate of 2%, a level it has not reached since February 2021. The overall rate in September was 0.2 percentage points lower than in August.
Although headlines showed the central bank moving closer to its target, inflation excluding food and energy stood at 2.7%, after the so-called core measure rose 0.3% monthly. The annual rate was 0.1 percentage points higher than forecast, but the same as in August.
The inflation move was centered on services prices, which rose 0.3% while goods prices fell 0.1%, marking the fourth significant deflation reading in the category in the past five months. Property prices slowed, rising 0.3%. Energy goods and services fell 2%.
In the report, markets are betting heavily that the Fed will cut its key short-term lending rate at its meeting next week. In September, the central bank cut interest rates by half a percentage point, a move that was virtually unprecedented during an economic recovery.
Policymakers have expressed confidence that inflation is moving closer to target while expressing concern about the state of the labor market, although most indicators suggest that hiring and layoffs are continuing is low.
A separate report Thursday morning reinforced the notion that companies are largely holding on to their workforce.
According to the Labor Department, initial jobless claims totaled 216,000 in the week ended Oct. 26, a decline of 12,000 from the previous period's upwardly revised level. The total number was also below the forecast of 230,000.
Despite concerns about inflation, the Commerce Department report showed revenue and spending remained flat during the month.
Personal income rose 0.3%, slightly higher than August and in line with expectations. Consumer spending rose 0.5%, exceeding the forecast by 0.1 percentage points. The personal savings rate fell to 4.6%, the lowest level of the year.
In another data point, the Bureau of Labor Statistics reported Thursday that the labor cost index rose 0.8% in the third quarter, 0.1 percent below forecast. On a 12-month basis, the index, which measures wages, salaries and benefits, rose 3.9%, compared with a 2.4% rise in the consumer price index.
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