The Federal Reserve’s aggressive campaign against inflation faced a speedbump Thursday after Labor Department data revealed consumer prices rose more in September than anticipated.
Consumers are finally feeling relief regarding price increases.
Consumer prices rose 3.7% on an annual basis and 0.4% month-over-month in September, topping consensus economist estimates of 3.6% and 0.3%, respectively.
Crucially, core inflation, which is the consumer price index excluding the more volatile food and energy sub-indexes, was 4.1% in September on an annual basis, in line with the consensus forecast of 4.1%.
That’s the lowest reading for core inflation since September 2021.
Annual inflation peaked at over 9% last summer, moderating significantly as the Fed raised interest rates from near-zero to over 5%, though inflation remains far above the Fed’s long-term target of 2%. Wednesday’s producer price index report revealed wholesale inflation jumped far more than expected to its highest level since April. The International Monetary Fund said this week it expects inflation to remain well above central banks’ target through at least 2025, weighing on global economic growth.
CPI’s sister personal consumption expenditure index will come out October 27, revealing in more detail how Americans’ spending has changed due to the rise in prices (the PCE index is the Fed’s favored measure of inflation). The Fed will next make a decision on interest rates November 1.