Fed’s Key Inflation Gauge Jumps 0.5% in September, America’s Rising Costs to ‘Punish’ Democrats

The U.S. central bank’s key inflation gauge, the personal consumption expenditures (PCE) price index, increased by 0.5% in September, according to data released by the U.S. Commerce Department on Oct. 28. Meanwhile, markets expect with near-certainty that the Federal Reserve will codify its fourth consecutive rate hike by 75 basis points (bps) next month. While investors await the next bank rate increase, midterm elections start on Nov. 8 and reports say inflation is weighing heavily on the minds of most Americans.

On Friday, Oct. 28, 2022, the U.S. Commerce Department published the latest PCE data for September and data shows a 0.5% increase from the month prior and a rise of 5.1% during the past year. The PCE is considered the Fed’s preferred measure of inflation as it shows the measure of personal income and disposable personal income (DPI) metrics. “Personal income increased $78.9 billion (0.4 percent) in September,” the Bureau of Economic Analysis (BEA) said on Friday.

The increase in wage growth has been high, alongside the latest consumer price index (CPI) report that noted U.S. consumer prices jumped 8.2% in September. The most recent data published by the BEA on Friday has made analysts believe the Fed will add another three-quarters of a percentage point next week. “The level of wage growth is still very high, even if it is moving in the right direction,” Laura Rosner-Warburton, a senior economist at Macropolicy Perspectives told the New York Times. The economist added:

It’s probably putting upward pressure on services inflation.

Markets are near-certain a 75bps rate hike is in the cards for the next Fed rate increase. However, CNBC’s financial reporter Jeff Cox says: “markets think the Fed might downshift the pace of its rate hikes ahead.” According to Cox’s data, there’s a 60% chance the Fed will go softer in December with a 50bps hike. Surprisingly, on Oct. 26, the Bank of Canada increased its benchmark bank rate by 50bps when the market expected a 75bps rise. In addition to the Federal Reserve’s next meeting, the U.S. midterm elections will start polls on Nov. 8, and reports say Democrats may get punished by voters over inflation.

Amid the skyrocketing inflation, an editorial published by the Economist opines “Joe Biden’s protectionism is costly for America and the world.” USA Today’s Ingrid Jacques detailed how Democrats are concentrating on leveraging abortion as a pressing issue, while Americans seem to think inflation is a more pressing matter. For instance, instead of answering a question concerning the topic of inflation, Georgia’s Democratic candidate for governor, Stacey Abrams, went right back to talking about abortion.

“Democrats have overplayed their hand, and voters know it,” Jacques explained on Oct. 29.

What do you think about the inflation data in the United States and the possibility of the Fed raising the rate by 75bps? Let us know what you think about this subject in the comments section below.