Andrew Hollenhorst, economist at Citi, believes that the combination of the US PPI index and yesterday's unexpectedly higher CPI supports the Federal Reserve's decision to cut interest rates by 25 basis points next month. The Fed's preferred inflation measure, the PCE, combines CPI and PPI price data, so the combination of the two data allows forecasters to make accurate predictions for September PCE. Citi believes core PCE, which strips out volatile food and energy prices, will rise 0.21 per cent month-on-month in September, while the 12-month PCE will fall to 2.6 per cent from 2.7 per cent in August, which Mr. Hollenhorst notes should allow the Fed to continue cutting interest rates.