Fed's Preferred Inflation Gauge Projected to Show Sticky Prices and Resilient Spending

The personal consumption expenditures price index scheduled for release on Wednesday is expected to show persistent inflation and continued consumer spending, providing little rationale for Federal Reserve officials to pause interest rate increases, according to reporting from CNBC Business (https://www.cnbc.com/2026/09/29/the-feds-main-inflation-measure-will-be-released-wednesday-heres-what-to-expect.html).

Dow Jones consensus forecasts project that the PCE price index—the central bank's primary inflation benchmark—will increase 0.3% on a monthly basis for both headline and core readings. On an annual basis, overall and core PCE are expected to rise 3.7% and 3.3% respectively, unchanged from July levels and remaining well above the Fed's 2% target. Dan North, senior economist at Allianz Trade, noted that with core inflation holding firm, policymakers will find it difficult to overlook the persistent price pressures.

Federal Reserve officials approved a 25-basis-point rate increase at their September meeting, lifting the target borrowing range to between 3.75% and 4.00%. Projections from 16 of the 18 Federal Open Market Committee participants pointed to at least one additional hike in 2026. Fed Chairman Kevin Warsh recently noted that labor demand, capital investment, and private earnings indicate economic durability, remarking that broad financial conditions do not appear restrictive.

Fed Governor Michael Barr pointed to tariffs and the war with Iran as ongoing disruptions to disinflation progress, reiterating that further rate increases will likely be needed. In contrast, New York Fed President John Williams cited demand from artificial intelligence infrastructure buildouts as an inflation driver, though he noted easing goods tariffs and decelerating housing services costs, suggesting monetary officials have time to evaluate data before moving again.

The upcoming report also incorporates Bureau of Economic Analysis revisions dating back to 2021 across legal services, software, computer accessories, and portfolio management. Wall Street estimates suggest these methodological updates could trim prior annual July PCE inflation readings by 0.2 to 0.3 percentage points. Meanwhile, consensus forecasts project August consumer spending rose 0.8%, up from 0.2% in July, supported by Bank of America data showing card spending grew 6.9% year-over-year for the week ended September 19.