Key inflation measure that the Fed follows rose 0.2% in October, less than expected

A man climbs into the fridge for milk at a Walmart store in Rosemead, California on November 22, 2022.

The Commerce Department reported Thursday that inflation rose in October in line with expectations.

The core personal consumption expenditures price index is a gauge that excludes food and energy and is favored by the Federal Reserve. The annual gain was in line despite the monthly increase being below the estimate.

There was a monthly increase of 0.5% and an annual increase of 5.2% in September.

The headline PCE was up on the month and on the year. The annual gain was down from the previous year, but the monthly increase was the same.

The department reported that personal income increased by 0.7% in the month, well ahead of the 0.4% estimate, and that spending increased by 0.8%.

The PCE index is preferred by the Fed because it takes into account changes in consumer behavior such as substituting cheaper goods for more expensive ones. The consumer price index is a measure of change in prices.

Policymakers think core inflation is a more reliable measure as food and energy prices tend to fluctuate more than other items

The Labor Department reported that weekly unemployment claims fell to 225,000, a decline of 16,000 from the previous week and below the 240,000 estimate.

According to a jobs report from Challenger, Gray & Christmas, there were more planned layoffs in November than in the previous month. The year-to-date layoff total is the second- lowest in a data set that dates to 1993.

At a time when the Fed is trying to bring down inflation, the data is important.

In a speech Wednesday, Chairman Powell said he saw some signs that price increases are abating but that he needs to see more consistent evidence before the central bank can change its policy. He said that he thinks the rate hikes can get smaller as early as December.

The path ahead for inflation is highly uncertain.

The data shows that the numbers are not stable. Goods inflation rose for the month after falling in the previous three months, while services inflation fell for the second straight month. Economists have been looking for a shift back to a more services-based economy after outsized demand for goods played a big role in the inflation surge.

Energy goods and services prices went up 2.5%.

The jobs market is being watched by the Fed.

Continuing claims increased by 57,000 to 1.61 million, the highest level since February, as unemployment claims continued to trend higher.