US inflation rises to 3.6%, but markets remain calm

US inflation continued to rise this afternoon, just as economists had expected. At the same time, the economy performed better than predicted, but the financial markets remain remarkably calm. Time to dive into the numbers.

The PCE price index, the US central bank's (Fed) favorite inflation gauge, came in on every front as expected. On an annual basis, prices rose by 3.6 percent, 0.2 percentage points more than a month earlier.

Core inflation, excluding the moveable prices of food and energy, also rose from 3.0 to 3.1 percent. This has now increased by 0.3 percent per month for two months in a row.

The difference between the two figures is mainly due to the pump. In the better-known consumer price index (CPI), petrol was 9.1 percent more expensive in September than in August, due to the high oil price since the attacks on Iran.

So no surprise, but it's not reassuring either. Inflation is well above the Fed target of 2 percent and rising again.

Yesterday, Fed Chairman Kevin Warsh emphasized that inflation should be reduced to 2 percent in any case. However, he did see progress, pointing to swaps: contracts with which investors hedge against future inflation.

There is another concern under the bonnet. Americans spent 0.5 percent more in September, but barely bought anything extra for it after adjusting for inflation.

That money comes partly from the piggy bank: the savings rate, the part of the income that is set aside, fell from 4.1 to 3.8 percent.

This is not a pleasant picture for the Fed. In advance, the market already had a more than 80 percent chance of an interest rate increase on 9 December, and the figures give little reason to adjust that.

Meanwhile, the economy is holding up well: converted to an annual basis, it grew by 3.4 percent in the third quarter, more than expected and at 2.2 percent a quarter earlier.

That is good news for corporate profits, which also gives the Fed little reason to let go of the brake.

Bitcoin (BTC), Wall Street and also gold are reacting quietly to the new data for the time being.

Just before the war with Iran, PCE inflation was still 2.8 percent. After the attacks at the end of February, the Strait of Hormuz virtually closed and oil prices shot up. In May, inflation peaked at 3.8 percent.

After that, the oil price fell and inflation also fell to 3.4 percent in the summer. Since August, oil prices have been rising again after the stock fell and tankers were attacked. This second wave is now clearly visible in the figures for the first time.

Core inflation remained remarkably stable at around 3 percent throughout that period. Expensive energy did have an impact on transport and producer prices, but so far this has hardly been reflected in core inflation. At 3.1 percent, that figure is now also creeping up.