On November 16, 2021, gasoline prices are displayed at a gas station.
The Commerce Department gauge shows that inflation rose strongly in October, its fastest pace since the early 1990s.
The so-called core reading, which excludes food and energy, increased 4.1% from a year ago, the first increase since 1991. The Fed prefers that measure because it excludes the volatility that the two categories can show.
The reading was in line with the estimate.
The PCE index rose 5%, the fastest gain since 1990.
The amount of money consumers spent rose 1.3% in the month, which was higher than the 1% estimate. The personal income increase was well ahead of the estimate.
Energy costs rose 30.2% from a year ago, while food prices increased 4.8%. Goods inflation jumped 7.3% in October, up from the 6.4% pace in the previous month, while services inflation was the same as in September.
The 7.3% rate as a share of disposable personal income declined from 8.2% in September, as personal savings totaled $1.32 trillion for the month.
Fed policymakers have been wrestling with inflation that has been more aggressive than they anticipated. Markets are anticipating that interest rates will have to rise soon as well because officials believe that inflation is at the point where they can start gradually reducing the amount of monthlyStimulus they are providing through bond purchases.
The probability of a 25 basis point rate hike in 2022, with traders now pricing it in, is rising. Fed officials have said that they expect to raise rates at most one time next year, though that could change at the December Federal Open Market Committee meeting, when officials will release their latest forecast on rates, unemployment and GDP growth.
Consumer sentiment has been hit by inflation.
The University of Michigan's confidence reading dropped to 63.5 in November, its worst reading in a decade and down from 67.9 in October.
The decline was due to a combination of rapidly escalating inflation and the absence of federal policies that would effectively curb a surging inflation rate. There were supply-line shortages.
The survey's chief economist said that the roots of inflation have grown and spread across the economy.