Core inflation accelerates to 3.1% as third-quarter GDP grows 3.4%

Fed holds benchmark rates at 3.75%-4% range

Core inflation accelerated to 3.1% in September, and gross domestic product grew at a 3.4% rate in the third quarter, the U.S. Bureau of Economic Analysis reported Thursday. The release paired the price gauge the Federal Reserve watches most closely with the latest reading on output.

The personal consumption expenditures price index rose 3.6% from a year earlier in September, the bureau said. For September alone the index advanced 0.5%, the largest single-month increase since March, the first full month of the Iran war. The 3.1% core figure excludes food and energy.

Federal Reserve Economic Data recorded at the Oct. 29 vintage show the same year-over-year readings: 3.6% for the PCE price index and 3.1% for core PCE, the gauge the Fed treats as its operational inflation target.

The inflation data landed a day after the Federal Open Market Committee decided to keep benchmark interest rates in the 3.75% to 4% target range. The committee increased the target range in September, the first increase since 2023.

“The period right in front of us is information rich,” Federal Reserve Chairman Kevin Warsh said in a press conference Wednesday. “There is a lot that’s happening in the world. My colleagues and I are keen to take notice of it.”

Thursday’s GDP report showed the economy grew by more than expected in the third quarter. The 3.4% rate of growth outpaced the 2.2% rate from the second quarter and economists’ projection of a 3.1% rate.

Investment, consumer spending and government spending were the largest contributors to third-quarter GDP growth, the bureau said.

The third-quarter number marked a bounce-back after real gross domestic product slowed about 0.4% in the second quarter compared with the first. Growth remained slower than the 3.9% rate recorded in the third quarter of 2025.