Hurricane Katrina delivered a serious blow to US consumer confidence, sending it to its lowest level for a decade in September, according to figures released yesterday.

The University of Michigan's widely watched sentiment index for September fell to 76.9 from 89.1 last month - more than economists had expected.

Expectations about the future fell even more, with the index measuring the outlook for the year ahead down at its lowest level for almost 13 years.

But economists warned that the sentiment numbers were volatile and cautioned against reading too much into them. Economists will have to wait until October, when the full month's figures become available, to assess Katrina's true impact.

"The index was likely weighed down by the emotional response to the devastating images," said John Ryding, chief US economist at Bear Stearns.

Stephen Stanley, economist at RBS Greenwich Capital, said that just because people were "extremely concerned" in the first days after Katrina, this did not mean spending had fallen apart.

But the Federal Reserve is likely to be concerned by the sharp rise in inflation expectations - to 4.6 per cent from 3.1 per cent - their highest level since 1990. Longer-term expectations nudged up to 3.1 per cent from 2.8 per cent.

The Fed meets next week and is expected to raise interest rates by a quarter-point to 3.75 per cent.