US consumer spending rose last month as ‘core inflation’ climbed 3.7%

A key marker used by the Federal Reserve to gauge the rate of inflation rose to a four-month high in September as the continued increase in prices and stubbornly strong consumer spending prompted fears the central bank could keep hiking interest rates.

The core personal consumption expenditures price index (PCE), which excludes food and energy costs, increased by 0.3% last month, according to a report by the Bureau of Economic Analysis released Friday.

While core prices kept climbing, so did inflation-adjusted consumer spending, which rose 0.4% in September, according to federal data.

Fears of a recession as well as the news that JPMorgan Chase CEO Jamie Dimon sold $141 million worth of shares in the nation’s largest bank sent stockholders running for cover on Friday.

The Dow Jones Industrial Average fell 366.71 points, or 1.1%, while the S&P 500 officially entered correction territory, shedding 0.48%. A correction is when an index falls at least 10% from a recent high.

The tech-dominant Nasdaq index rose nearly 50 points, or 0.4%.

All three indexes suffered steep declines this past week. The Dow dropped 2% while the S&P 500 fell 2.5%.

Shaky earnings reports from Meta and Alphabet Inc. dragged down the Nasdaq this week, which fell 2.6%.

Central bankers have repeatedly warned that continued economic growth coupled with robust consumer spending will leave them no choice but to raise interest rates again, though observers believe the Fed will leave rates unchanged when it meets next week.

Since last year, the Fed has hiked interest rates 11 times – the fastest pace of tightening since the early 1980s.

Fed Chair Jerome Powell said last month that “inflation is still too high” – leaving many to believe that more hikes were in the offing.

The Consumer Price Index, a closely watched measure of inflation that tracks changes in the costs of everyday goods and services, rose 3.7% last month, more than analysts expected.

The Fed has indicated that it aims to get the CPI to 2% before it will consider lowering interest rates.

Since March 2022, the central bank has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range.