Inflation. It’s high. “Remains elevated,” as the Fed puts it in every FOMC statement, as though observing a phenomenon they’re powerless to address. (“The weather remains bad.”)

On Thursday, concurrent with the release of a US GDP report which suggested the AI buildout continues to drive meaningful “growth” (you can take those scare quotes however you want) across the world’s largest economy, the BEA said the Fed’s preferred measure of inflation ran 3.6% in September.

You’d have to check with Kevin Warsh’s inflation “task force” for confirmation, but by my math, 3.6% is 1.6ppt higher than 2%.

Warsh’s rule of thumb for policymaking — his “standard,” as set out in Jackson Hole — goes as follows:

We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job, our mandate and our charge to keep.

PCE inflation was 3.37% in July, 3.44% in August and, we learned on Thursday, 3.65% in September. So, in the context of Warsh’s “standard,” you can understand why the Fed kept rates on hold this week. Right? (That’s sarcasm.)

If you’re inclined to point out that Warsh specified “underlying” inflation, I’m inclined to be the bearer of bad news: So-called “supercore” PCE inflation — i.e., core services price growth excluding housing, the measure of “underlying” inflation the Fed prefers — rose at a 3.6% YoY clip last month, according to Thursday’s update.

As for “regular core” inflation, the unrounded, MoM core PCE print (what the market trades) for September was 0.32%, following 0.26% in August.

The figure above gives you a sense of how far afield we (still) are. Even with the BEA’s annual revisions (which moderated recent PCE inflation outcomes), the MoM pace has only matched the pre-pandemic average once since November.

The same BEA release showed real spending flatlined in September. Real disposable income contracted for the first time since the onset of the war.

The saving rate, meanwhile, fell to 3.8%. I want to dwell on that for a beat or two, if you’ll humor me.

The figure below shows you the saving rate before and after the above-mentioned September revisions to the BEA’s personal income and spending release.

The revisions rescued the series, which was in the process of making a run at the pre-GFC all-time lows. But with Thursday’s update, it’s back to the lowest since late-2022. I guess we’re gonna need more revisions.

So, despite a strong advance read on Q3 GDP, a closer look at the US consumer in September suggests “still elevated” inflation’s weighing on consumption. And where it isn’t, spending’s coming at the expense of savings.