Fed seen keeping to big rate hikes as inflation stays hot

(Reuters) - Federal Reserve policymakers, who have driven U.S. borrowing costs up faster this year than any time since the 1980s, got one less reason to slow that pace Friday after a government report showed inflation continues to run red hot.

The personal consumption expenditures price index, which the Fed targets at 2%, rose 6.2% in August from a year earlier, the Commerce Department reported. Underlying inflation, as measured by a core reading that excludes food and energy prices, rose 4.9% from 4.7% previously.

Even before the report the Fed was widely expected to deliver a fourth straight 75-basis-point interest rate hike when officials meet early next month.

So far this year policymakers have increased their benchmark policy rate by 3 full percentage points to a range of 3%-3.25%, and have signaled they expect to deliver another 1.5 percentage points by early next year, and then keep rates there through 2023 to slow the economy and undercut price pressures that have not been this high in 40 years.

"What we need to see is decreasing inflation on a sequential basis and we're just not seeing that yet," said Art Hogan, chief market strategist at B. Riley Wealth.

(Reporting by Ann Saphir and Bansar Mayru Kamdar; Editing by Chizu Nomiyama)