Key Highlights

● September PCE Inflation rose to its highest since May.

● Both headline and core measures climbed.

● The data came out on Thursday, October 29, 2026.

● It strengthened the case for a December hike.

The personal consumption expenditures price index for September, released on Thursday, October 29, showed inflation running hotter than earlier in the year. Both the headline index and the core measure, which strips out volatile food and energy prices, rose to their highest annual rates since May, according to market data.

The monthly headline increase matched forecasts. Reports differed on whether the monthly core reading was in line with expectations or slightly below them, with market data describing it as in line and market data pointing to a modest downside surprise. Either way, the year-over-year trend moved higher for both measures.

Why it matters to the Fed

The PCE index is the Fed's preferred inflation gauge, so the reading carries special weight. "Both headline and core PCE rose to their highest levels since May, underscoring that inflation remains a stubborn issue," a market analyst said.

The report came a day after the Federal Open Market Committee left its benchmark rate range unchanged in a 10-2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a quarter-point hike, and the committee's statement said, "Inflation remains elevated." The Fed had raised rates in September.

"Today's data strengthens the case for another rate increase in December," a Wealth advisor said.

The rest of the report

The same release offered a softer read on households. Personal Income and spending both rose less than economists expected in September, and the savings rate declined from August. Separately, third-quarter gross domestic product grew at its fastest pace in a year and beat forecasts, and initial jobless claims came in at 194,000, below the 202,000 expected.

Energy costs add another layer of risk. U.S. crude rose $2.12 to $104.12 a barrel on Friday, October 30, 2026, amid tensions around Iran and the Strait of Hormuz, and Brent settled at $113.43, according to market data. Oil gained steeply over October.

Markets and officials react

Traders moved toward the hawks. CME FedWatch data showed a December hike as the likely outcome on Friday, according to market data, and markets are pricing in more than half a point of hikes by mid-2027, according to LSEG data cited by market data.

Fed officials echoed the concern. St. Louis Fed President Alberto Musalem said on Friday, "I judge that additional firming of Monetary Policy will be necessary, and soon." Dallas Fed President Lorie Logan said she wants at least two more quarter-point hikes. Chair Kevin Warsh, while declining to offer forward guidance, said, "The Committee will deliver price stability."

The rate outlook weighed on gold, which fell $132.50 to $3,898.90 an ounce, a 52-week low. Stocks slid on Friday as well, with the S&P 500 down 140.32 points to 7,580.07, though the day's selling was driven mainly by an Intel (NASDAQ:INTC)-led chip rout.

What to watch

The October jobs report on Friday, November 6, is the next Big Data point before the Fed's December meeting, with ISM Manufacturing and services surveys earlier that week. The midterm elections take place on Tuesday, November 3. "Chair Warsh was reluctant to provide strong signals at the FOMC meeting yesterday," James McCann of Edward Jones said on Thursday, leaving the inflation data to do much of the talking.