Inflation Accelerated in September as Gasoline Erased Households' Pay Gains

Inflation accelerated in September, as the Federal Reserve's preferred price gauge rose at its fastest monthly pace since March.

The Bureau of Economic Analysis released both reports at 8:30 a.m. Eastern on Thursday, Oct. 29, 2026.

One covered personal income and outlays for September. The other was the advance estimate of third-quarter gross domestic product.

The personal consumption expenditures price index is the inflation gauge the Federal Reserve tracks for its 2% target.

That index rose 0.5% in September from August. It was the largest monthly increase since March.

From a year earlier, the index rose 3.6%. That was up from 3.4% in August.

Excluding food and energy, core prices rose 0.3% on the month. Core inflation was 3.1% from a year earlier, up from 3.0% in August.

Gasoline did most of the damage in September

Prices for gasoline and other energy goods surged 9.2% in September from August.

Wire coverage tied the fuel surge to the Iran war. Restrictions on shipping through the Strait of Hormuz kept fuel costs elevated.

The energy jump explains the gap between the two readings. Headline prices rose 0.5% on the month, while core prices rose 0.3%.

Households spent more and kept less

Personal income rose $54.5 billion in September, or 0.2%. Disposable personal income, income after personal current taxes, rose $52.7 billion, also 0.2%.

Consumer spending rose $113.1 billion, or 0.5%. Services accounted for $78.1 billion of the increase, and goods for $35.1 billion.

After inflation, the picture reversed. Real disposable income fell 0.3% in September.

Real consumer spending rose just $2.6 billion, less than 0.1%. Reuters described inflation-adjusted spending as unchanged on the month.

Households covered the gap from saving. Personal saving was $911.1 billion, and the saving rate fell to 3.8% of disposable income.

The August saving rate was 4.0%, on the revised figures published with the September release.

Personal outlays, spending plus interest and transfer payments, rose $113.0 billion.

Growth accelerated across the quarter

Real gross domestic product rose at a 3.4% annual rate in the third quarter. Growth was 2.2% in the second quarter.

Investment, consumer spending, and government spending all rose. A decrease in exports partly offset those gains.

Within investment, private inventory investment and equipment led the increase.

Imports increased, and imports are a subtraction in the growth calculation. Consumer spending grew at a 3.8% annual rate across the quarter.

Real final sales to private domestic purchasers rose 4.9%. That demand measure, consumer spending plus private fixed investment, was up from 4.6% in the second quarter.

The quarter's own price gauges cooled sharply. Those are quarterly annualized rates, a different measure from the September monthly figures above.

The quarterly price index rose at a 2.1% annual rate, down from 5.0% in the second quarter. Excluding food and energy, it rose 2.5%, down from 3.3%.

The central bank decided before it saw any of this

The Federal Open Market Committee held its target range at 3.75% to 4.00% on Wednesday, Oct. 28. The vote was 10-2.

The September data landed the next morning, on Oct. 29. The committee therefore decided without it, on August figures and earlier data.

Lisa D. Cook and Beth M. Hammack voted against the hold. Both preferred to raise the target range by a quarter percentage point.

The statement said inflation "remains elevated." It also said the committee "will deliver price stability."

Reuters reported that the September data support economists' expectations of a December rate increase.

Financial markets were pricing in a roughly 84.6% chance of a rate hike in December, Reuters reported, citing the CME FedWatch Tool.

Chair Kevin Warsh pointed at the same pressure after the decision. "Energy and related prices have moved higher again in recent weeks," he told reporters, in remarks reported by Reuters.

The forecasts, checked against the prints

The monthly headline increase matched the Dow Jones consensus forecast. The annual rate came in 0.1 percentage point below expectations, at 3.6%.

Both core readings were in line with economists' forecasts.

Spending rose 0.5%, slightly below the 0.6% gain forecast. Income rose 0.2%, against expectations for a 0.3% increase.

Growth beat the tally instead. Gross domestic product rose 3.4%, above the 3.1% estimate.

What remains unknown

What remains unknown is whether the energy surge broadens into other prices. "Our job is to ensure that relative price changes in some sectors do not broaden out across the economy," Warsh said, in remarks reported by Reuters.

Also unknown is whether households keep spending faster than income. A second month of falling real disposable income would deepen the saving squeeze.

What to watch is the next data round on Nov. 25, 2026. It brings October income and outlays and the second estimate of third-quarter growth.

The December policy meeting is the decision that follows. The committee has not committed to a December move.