Business

Americans boost spending as inflation slows slightly

A sales associate helps a prospective customer as laptops sit on display in a Costco warehouse, Aug. 15, 2022, in Sheridn, Colo.

Consumer prices rose at slightly slower rates in October even as Americans boosted their spending, according to data released Thursday by the Commerce Department.

The personal consumption expenditures (PCE) price index, a closely watched inflation gauge, rose 0.3 percent in October and 6 percent since the same month a year ago. While the monthly inflation rate stayed even with September’s 0.3 percent increase in prices, the annual inflation rate dropped from 6.3 percent in September.

Without food and energy prices, the PCE index rose 0.2 percent on the month in October — down from a 0.5 percent monthly increase in September — and 5 percent on the year.

The PCE price index is the Federal Reserve’s preferred way to track inflation and heavily influences how high the central bank hikes or cuts interest rates. The slight slowdown in price growth keeps the Fed on track to keep boosting rates, but likely in smaller increments.

The Fed’s monetary policy committee is set to meet Dec. 13-14 and is expected to hike rates for the seventh time this year.

Federal Reserve Chair Jerome Powell warned Wednesday the bank needs to see “substantially more evidence” to believe inflation is steadily falling before halting its rate hikes. The Fed aims for a 2 percent annual inflation rate, which is well below current levels of price growth. 

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in a speech hosted by The Brookings Institution.

Higher interest rates are meant to slow the economy by giving households and businesses less money to spend on goods and services. While the Fed is aiming to slow the economy into lower inflation without causing a recession, the bank’s own projections from September foresee a significant increase in unemployment by the end of 2023.

For now, many Americans are pushing through higher prices as a strong job market propels wages.

Personal consumption expenditures — a measure of consumer spending — rose 0.8 percent in October and 0.5 percent when adjusting for inflation. American paychecks rose 0.7 percent on the month and 0.4 percent when adjusting for inflation, up from 0.3 percent and 0 percent respectively in September.