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 Commerce Department reports 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 the largest since March but in line with the Dow Jones consensus, while the annual rate was 0.1 percentage point below.

Excluding food and energy, the core PCE posted respective readings of 0.3% and 3.1%, in line with the consensus.…