The pace of price increases stepped up in September, keeping inflation well above the Federal Reserve's target, while the economy grew faster than expected in the third quarter, according to a Commerce Department report Thursday.

The personal consumption expenditures price index increased a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 3.6%.The monthly increase was in line with the Dow Jones consensus, while the annual rate was 0.1 percentage point below.

Excluding food and energy, core PCE posted respective readings of 0.3% and 3.1%, in line with the consensus. While the Fed follows both measures closely, officials generally see the core reading as more indicative of longer-term inflation trends.

While inflation continued to run ahead of the Fed's 2% target, the Commerce Department also reported that gross domestic product was strong in the third quarter.

GDP increased at a seasonally adjusted annualized pace of 3.4%, better than the 3.1% estimate and well ahead of the 2.2% in the second quarter.

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