Wall Street economists are now forecasting an acceleration in the Federal Reserve’s preferred inflation gauge after a surprisingly hot wholesale price report.
The producer price index climbed 1.3% in the latest reading, the biggest monthly gain since March 2022 and more than double the 0.6% consensus estimate.
That pushed the year-over-year PPI increase to 6.3%, the largest annual jump since December 2022, paced by a 20% surge in gasoline prices.
Even stripping out food, energy, and trade services, prices rose a solid 0.5%, signaling that inflationary pressures extend well beyond the energy sector.
Seven Wall Street estimates gathered by CNBC now forecast core personal consumption expenditures inflation for September to rise 0.32%, up from 0.25% in August.
A 0.32% monthly increase in core PCE would push the year-over-year rate to 3.1%, up from 3.01% in August, keeping inflation well above the Fed’s 2% target.
Estimates from individual firms ranged from a high of 0.35% from Barclays to a low of 0.29% from Oxford Economics, reflecting broad consensus that price pressures remain sticky.
“We see real risks the Fed will deliver another rate hike in two weeks’ time even as recent Fedspeak tempered expectations for back-to-back increases,” wrote Kathy Bostjancic, chief economist at Nationwide.
Fed futures on Thursday reflected a 29% probability of a hike at the meeting later this month, but a 91% probability of at least one additional hike by December.
Several Fed officials have signaled they do not need to rush additional rate increases, though most have acknowledged that further tightening remains on the table.
“The picture is not benign with inflation elevated and intensifying,” wrote Alex Pelle, senior U.S. economist at Mizuho Securities.
Pelle added, “On the economic data alone, there is little reason for the Fed to hesitate to continue moving the policy rate higher.”
Fed Chairman Kevin Warsh has indicated that a key test for pausing hikes is confidence that inflation will return to the 2% target in a timely manner.
Both headline and core PCE inflation have remained above that target since 2021, with gains intensifying following the introduction of tariffs in April 2025 and accelerating further since the beginning of the Iran war.
The Fed favors PCE over the consumer price index because it more closely reflects actual American spending patterns and adjusts its weightings when consumers shift their behavior.
