Rising PPI shows the Fed’s work is not done, economists say.

Wall Street estimates of the Federal Reserve’s preferred inflation measure now predict an acceleration from the levels that triggered the central bank’s interest rate hike last month.

The estimates came after the producer price index beat expectations on Thursday at 1.3%, the highest monthly increase since March 2022 and more than double the consensus of 0.6%.

As a result, the year-on-year increase rate was 6.3%, the largest increase since December 2022. The pace of increase was a 20% increase in gasoline prices. But even excluding food, energy and trade services, prices were still up 0.5%, showing that inflation is broader than just energy.

Core consumer spending inflation is expected to rise 0.32% in September, up from 0.25% in August, when it is released later this month, according to seven Wall Street estimates compiled by CNBC. Wall Street economists use the Consumer Price Index and PPI, which will be released on Wednesday, to estimate PCE.

“Despite the recent FedSpeak dampening expectations for a series of rate hikes, we still see a real risk that the Fed will raise rates again within the next two weeks,” said Kathy Bosjancic, chief economist at Nationwide.

Several Fed officials have suggested there is a need for further rate hikes, but have insisted there is no need to rush to do so. As a result, Thursday’s Fed futures showed a 29% chance of a rate hike at the Fed meeting later this month, but a 91% chance of at least one rate hike by December.

A 0.32% rise in PCE would bring core inflation to 3.1% year-on-year, up from 3.01% in August. The range of expectations was highest at 0.35% for Barclays and lowest at 0.29% for Oxford Economics.

“The situation is not looking good because inflation is rising and getting more intense,” said Alex Perre, senior U.S. economist at Mizuho Securities. “Looking at economic data alone, there is little reason for the Fed to hesitate in continuing to raise interest rates.”

Fed Chairman Kevin Warsh has suggested that one of the litmus tests for not raising rates is confidence that inflation will return to the Fed’s 2% target in a timely manner. Headline and core PCE inflation have been above target since 2021. Tariffs have been steadily rising since they were introduced in April 2025. The rate of increase has accelerated since the start of the Iran war.

The Fed prefers the PCE because it believes it more closely resembles how Americans actually spend their money than the CPI, and that its weightings change as consumers’ spending patterns change.