The higher prices for a number of basics could not be made up by a decline in gasoline prices.
The Federal Reserve continues to struggle with inflation, as evidenced by the 0.4% increase in consumer prices in September, according to data released on Thursday by the Bureau of Labor Statistics.
Following an increase of 8.3% in August, overall inflation increased by 8.2% annually, while the core measure of inflation, which excludes the cost of energy and food, increased by 0.6% for the month and 6.6% for the year.
The rise in housing, food, and medical expenses was partially offset by a decline in petrol prices.
The consumer reading was released a day after wholesale inflation was estimated to have increased by 0.4% in September and 8.5% over the previous twelve months.
“The most unexpected statistic was the September core CPI (year-over-year) number,” said Peter C. Earle, an economist at the American Institute for Economic Research. “It came in at 6.6%, higher than both last month’s number and the predicted number (6.5%).”
It’s the aftermath of the highly expansionary monetary policies early in the pandemic, he continued. “There’s no blaming Putin or greed for that,” he said.
Analysts believe the Fed will have no reason to stop hiking rates as long as prices continue to climb and are spreading to the services industry. A 75 basis point increase is now anticipated when the central bank’s monetary policy committee meets in November.
Michael Kitchen, senior money market portfolio manager for Cavanal Hill Investment Management, said that it might take a lot for the Fed to budge from its present forceful rate campaign.
He continued, “Current unemployment numbers are not a problem, and it opens the way for more tightening.” To persuade the Fed to hold off on raising interest rates by 75 basis points next month, in my opinion, we would need to witness a considerable improvement.
The meeting’s minutes stated that participants “recognized that inflation remained unacceptably high and substantially beyond the committee’s longer-run aim of 2%.” Participants noted that recent inflation data had consistently exceeded their projections and that as a result, inflation was dropping more slowly than they had initially anticipated.
However, the Fed is succeeding in slowing the economy to some extent. Stock prices are down around 25% from a year ago, and the housing market is slowing down significantly from its scorching speed in 2021.
Meanwhile, the number of Americans submitting their initial unemployment insurance claims increased by 9,000 to 228,000, according to data released on Thursday by the Labor Department.
The four-week moving average increased by 5,000 to 211,500, from the previous time frame.
According to Elizabeth Crofoot, senior economist at Lightcast, “rising prices combined with stock market drops have damaged retirement funds, leaving many possibly facing a return to the job market.”