Wall Street's latest estimates of the Federal Reserve's preferred inflation indicators suggest that the pace of inflation is expected to accelerate further than what prompted the central bank to raise interest rates last month.

This expectation emerged after the Producer Price Index ( PPI ) released on Thursday came in higher than expected. The data shows that PPI rose 1.3% month-on-month, marking the largest monthly increase since March 2022 and exceeding the market consensus forecast of 0.6%.

This drove the year-on-year increase for PPI to 6.3%, the largest increase since December 2022. The rise was mainly driven by a 20% increase in gasoline prices. However, even after excluding food, energy, and trade services, prices still rose by a healthy 0.5%, indicating that inflation is not solely driven by energy factors.

Seven Wall Street institutions, as summarized by CNBC, estimate that core personal consumption expenditure ( PCE ) inflation for September will be announced later this month, with an expected increase of 0.32% on a month-on-month basis, higher than the 0.25% in August. Wall Street economists will use the Consumer Price Index ( CPI ) and PPI , which will be released on Wednesday, to estimate PCE .

Nationwide Chief Economist Kathy Bostjancic writes: "We see substantial risks, and the Federal Reserve may raise interest rates again in two weeks, although recent statements by Fed officials have weakened market expectations for consecutive rate hikes."

Several Federal Reserve officials stated that the Fed does not need to rush to raise interest rates, but they also hinted that further rate hikes may still be necessary. As a result, Thursday's federal funds futures indicated that the probability of a rate hike at the Fed's meeting at the end of this month is only 29%, but the probability of at least one rate hike before December is 91%.

If PCE rises 0.32% on a month-on-month basis, the core inflation rate will climb to 3.1%, higher than 3.01% in August. Estimates range from 0.35% by Barclays to 0.29% by Oxford Economics.

Mizuho Securities Senior American economist Alex Pelle writes: "Inflation is high and accelerating, and the situation is not optimistic. Based solely on economic data, the Federal Reserve has little reason to hesitate about continuing to raise policy rates."

The Chairman of the Federal Reserve, Kevin Warsh, has stated that one criterion for not raising interest rates is whether there is confidence that inflation will return to the Fed's target of 2% in a timely manner. Since 2021, both overall PCE and core PCE inflation have been above the target. Since the introduction of tariffs in April 2025, these two indicators have risen steadily; since the start of the Iran war, the increase has accelerated further.

The Federal Reserve prefers PCE because, compared to CPI, it believes that PCE is closer to the actual consumption patterns of Americans, and it will adjust the weights when consumers change their spending patterns.