Fed's core inflation gauge expected to show steady price pressures ahead of policy meeting

The Federal Reserve's primary inflation gauge, the personal consumption expenditures (PCE) price index, is projected to increase 0.3% for both the overall and core measures in the upcoming release, according to a Dow Jones consensus. On an annual basis, the index is expected to show gains of 3.7% overall and 3.3% for core inflation, unchanged from July and well above the Fed's 2% goal.

"The Fed is going to look at this and say, 'Hey, you know, the core is not moving, and I don't have any expectations or anything to believe that it's going to start going back down in any sort of convincing way,'" said Dan North, senior economist at Allianz Trade. "It's still way above target ... So I think it's really embedded in there to the extent that the Fed is not going to be able to ignore it or explain it away."

Fed officials at their September meeting approved a 0.25 percentage-point rate increase and indicated the likelihood of another hike before year-end. Most of the 18 Federal Open Market Committee members who provided forecasts expect at least one more move in 2026 as they raised their consensus PCE inflation outlook.

Fed Chairman Kevin Warsh told reporters that hiring, business investment and private-sector earnings show the economy remains strong, adding that broad financial conditions are not restrictive. Governor Michael Barr noted that tariffs and the ongoing conflict with Iran have disrupted progress toward the 2% inflation goal and said he does not yet see a clear trend toward a timely return to that target. He reiterated that further rate adjustments are likely needed.

New York Fed President John Williams highlighted the artificial-intelligence buildout as a factor sustaining price pressures but pointed to easing housing-service costs and reduced tariff-related pressure on goods prices. He described the policy outlook as less urgent, though he expects one more upward rate adjustment this year.

Consumer spending appears resilient despite higher prices. The Street consensus expects a 0.8% rise in August spending, driven in part by a surge in gasoline costs, while Bank of America reported a 6.9% year-over-year increase in debt and credit-card spending for the week ending Sept. 19, with a 26.5% jump in gasoline. Even excluding fuel, spending rose 5.7%.

Markets are pricing in a strong probability of an October rate hike, with another increase possible in December or January, reflecting the combination of persistent inflation and continued consumer demand.