US consumer prices rose higher than expected in September and underlying inflationary pressures continued to build, reinforcing expectations that the Federal Reserve would raise interest rates for the fourth time next month by 75 basis points.
The Labor Department said Thursday that the consumer price index rose 0.4 percent last month after rising 0.1 percent in August. Economists polled by Reuters had forecast the CPI to climb 0.2 percent.
In the 12 months during September, the CPI rose by 8.2 percent after rising 8.3 percent in August. Annual CPI reached 9.1 per cent in June, the biggest advance since November 1981.
Inflation continues to remain well above the Fed’s 2 percent target, despite continued easing in the supply chain and oil prices retreating from highs seen in the spring.
Gasoline prices are likely to fall after the Organization of the Petroleum Exporting Countries and allies last week decided to cut oil production. war against russia Ukraine An upside risk to food prices.
Persistently high inflation and a tight labor market allow the US central bank to maintain its aggressive monetary policy stance for some time. The government last week reported solid job growth in September, with the unemployment rate falling to a pre-pandemic low of 3.5 percent from 3.7 percent in August.
Financial markets have raised rates by another three-quarters of a percentage point at the Fed’s November 1-2 policy meeting, according to the CME’s FedWatch tool.
The Fed has raised its policy rate from near zero to 3.25 percent from the current limit of 3 percent since March. Minutes of the Fed’s September 20-21 meeting published on Wednesday showed policymakers “expecting inflation pressures to persist in the near term”.
Excluding volatile food and energy components, the CPI climbed 0.6 per cent in September after rising 0.6 per cent in August. The so-called core CPI jumped 6.6 percent in the 12 months to September. Core CPI grew 6.3 per cent year-on-year in August.
The underlying inflation is being driven largely by higher costs for rental housing. Government data on Wednesday showed September the weakest reading in prices of producer basic goods in nearly 2-1/2 years. However, the transition from producer to consumer inflation may take some time.
Some of the inflationary pressure is coming from a tight labor market. A second report from the Labor Department Thursday showed that the number of Americans filing new claims for unemployment benefits rose marginally over the past week. The state’s initial claims for unemployment benefits rose by 9,000 to a seasonally adjusted 228,000 for the week ended October 8.
Economists had predicted 225,000 applications for the latest week. The labor market remains tight. There were 1.7 job opportunities for every unemployed person on the last day of August, and layoffs are also few.
Minutes of the Fed’s September meeting told policymakers to “predict that the supply and demand imbalance in the labor market will gradually ease,” and that “the transition to a softer labor market will be accompanied by an increase in the unemployment rate.”
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