Lodging, Energy Costs Push Inflation Higher
September’s Consumer Price Index (CPI) showed that inflation rose 0.4%, with this monthly reading coming in just above estimates. On an annual basis, CPI held steady at 3.7% last month, though this is still near the lowest level in more than two years. Core CPI, which strips out volatile food and energy prices, increased 0.3% while the annual reading declined from 4.3% to 4.1%.
Rising shelter, energy and gasoline prices helped push inflation higher last month. However, oil prices have fallen since the end of September, which should help inflation moving forward if they don’t spike higher again.
What’s the bottom line? Inflation has made significant progress lower after peaking last year, with the headline reading at 3.7% (down from 9.1%) and the core reading at 4.1% (down from 6.6%). Remember, the Fed has been hiking its benchmark Fed Funds Rate (which is the overnight borrowing rate for banks) to try to slow the economy and curb inflation.
Their latest hike in July was the eleventh since March of last year, pushing the Fed Funds Rate to the highest level in 22 years. The Fed did not hike at their September meeting, so they could continue to assess incoming inflation, labor sector and other economic data.
Will the progress on inflation be enough for another pause at their November 1 meeting?