Consumer prices in the U.S. increased by slightly more than expected in September, according to a report released by the Labor Department on Thursday.
The Labor Department said its consumer price index rose by 0.2% in September, matching the increases seen in August and July. Economists had expected consumer prices to inch up by 0.1%.
Prices for shelter rose by 0.2% and food prices climbed by 0.4%, contributing to over 75% of the monthly increase in consumer prices.
A steep drop in energy prices helped limit the upside, with energy prices plunging by 1.9% amid a 4.1% nosedive in gasoline prices.
The report said core consumer prices, which exclude food and energy prices, climbed by 0.3% for the second consecutive month. Core prices were expected to rise by 0.2%.
The increase in core prices reflected the higher prices for shelter as well as higher prices for motor vehicle insurance, medical care, apparel, and airline fares. Prices for recreation and communication were among those that decreased.
Meanwhile, the Labor Department said the annual rate of consumer price growth slowed to 2.4% in September from 2.5% in August. Economists had expected the pace of price growth to slow to 2.3%.
The annual rate of core consumer price growth accelerated to 3.3% in September from 3.2% in August, while economists had expected the pace of growth to remain unchanged.
“Disinflation continues, but anyone who thought the Fed was going to lower rates by another .50 basis points in November is dead wrong,” said Jamie Cox, Managing Partner, Harris Financial Group.
“When interest rates aren’t high enough to lower growth, they aren’t high enough to stifle inflation completely either,” he added. “The Fed will lower rates, but at a measured pace from here.”
On Friday, the Labor Department is scheduled to release a separate report on producer price inflation in September.
Economists expect producer prices to rise by 0.2% in September, matching the increase in August, while the annual rate of producer price growth is expected to slow to 1.6% from 1.7%.
In Conclusion
The September consumer price index (CPI) report from the U.S. Labor Department reveals a slight uptick in inflation, driven mainly by higher shelter and food costs, which accounted for over 75% of the monthly increase.
While a 0.2% rise in CPI aligns with previous months, it exceeded economists’ expectations, suggesting inflationary pressures remain persistent in key areas such as housing and food. The steep drop in energy prices, particularly gasoline, helped counterbalance these increases, but core inflation—excluding volatile food and energy prices—rose by 0.3%, signaling that underlying inflation remains sticky.
This report suggests that while disinflation continues on an annual basis, particularly as the headline inflation rate slowed to 2.4%, the pace of core price growth accelerated slightly to 3.3%. These dynamics complicate the Federal Reserve’s policy decisions.
Despite progress in curbing inflation, pressures in sectors like housing, medical care, and motor vehicle insurance indicate that inflation has not been fully tamed. As Jamie Cox noted, the Fed is unlikely to aggressively cut interest rates soon, as doing so could risk reigniting inflation.
Instead, the central bank may adopt a more measured approach, cautiously monitoring price trends before making significant rate adjustments.
Via RTT News
