US inflation rose 3.7% in September — more than economists expected and still well above the Federal Reserve’s 2% target as the central bank weighs whether to further hike interest rates again by year’s end.
The reading for the Consumer Price Index — a closely-watched measure of inflation that tracks changes in the costs of everyday goods and services — matches the reading in August, and is slightly above the 3.6% advance economists expected, according to data by the Bureau of Labor Statistics released Thursday.
Though September’s CPI is also a cooldown from inflation’s 9.1% peak in June 2022, it still remains well above the Fed’s 2% goal — leaving the door open for another rate hike before year’s end.
Meanwhile, core CPI — a number that excludes volatile food and energy prices and serves as a closely watched gauge among policymakers for long-term trends — rose 4.1% from a year ago, in line with expectations.
The consumer price index, a closely followed inflation gauge, increased 0.4% on the month and 3.7% from a year ago, according to a Labor Department report Thursday. That compared to respective Dow Jones estimates of 0.3% and 3.6%.
The gasoline index’s 2.1% advance was also a large contributor to the CPI, the data showed, though the federal agency said shelter’s 0.2% increase accounted for over half of the increase.
Gasoline experienced an eye-watering 10.6% increase last month, when AAA figures showed that the average price for one gallon of gas was $3.85.
As of Thursday, one gallon of gas in the US averages $3.65, according to AAA.
It’s still unclear whether the slowdown in core price increases will lead Fed officials to conclude that further interest rate hikes this year aren’t necessary, especially considering the surprisingly-resilient labor market.
September’s job report revealed that the US economy added a whopping 336,000 jobs last month — an unexpected surge that contradicts the notion the Fed may tamp down its aggressive tightening regime.
Strong jobs reports have traditionally meant that wages push higher, triggering more inflation as Americans have increased power to spend.
Since inflation hit a four-decade peak at 9.1% last summer, the central bank has worked to bring the stubborn figure down to 2% by hiking rates another 25 basis points to a 22-year high in August in hopes of an economic slowdown.
The blowout number was nearly double the 170,000 jobs economists had expected, and also sharply higher than an upwardly revised 227,000 jobs added in August, according to fresh data released by the Bureau of Labor Statistics last week.
The benchmark federal funds rate currently sits between 5.25% and 5.5%. Last month, Fed officials unanimously decided to hold the record-high rate steady for the second time in six policy meetings so far this year.
But thanks to a strong labor market, the US economy has avoided a downturn, and even the Fed has said it’s no longer predicting the economy will slip into a recession by the end of the year.
Fed Chair Jerome Powell has said that central bankers will be taking a “data-dependent approach” moving forward, leaving more interest rate hikes before year’s end up in the air.
Markets were spooked ahead of the jobs report, falling more than 1% when the when the Labor Department released its Job Openings and Labor Turnover Summary, which showed job openings increased to 9.61 million in August — up from 8.9 million in July.