Used vehicles lift US consumer prices, but inflation slowing
WASHINGTON: US consumer prices increased for a fourth straight month in September, with the cost of cars and trucks rising by the most since 1969, though inflation is slowing amid labor market slack as the economy gradually recovers from the COVID-19 recession.
While the benign report from the Labor Department on Tuesday will have no direct impact on monetary policy, it should allow the Federal Reserve to keep interest rates near zero for a while and continue with massive cash infusions as it nurses the economy back to health. The US central bank is now more concerned about the labor market and has embraced flexible average inflation targeting, which in theory could see policymakers tolerate price increases above its 2 percent target for a period of perhaps several years to offset years in which inflation was lodged below its goal.
At least 25.5 million people are on unemployment benefits. The consumer price index rose 0.2 percent last month after gaining 0.4 percent in August. The CPI advanced 0.6 percent in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand.
A 6.7 percent jump in the prices of used cars and trucks accounted for most of the increase in the CPI last month. That was the biggest gain since
February 1969 and followed a 5.4 percent advance in August. There were also increases in the costs of new vehicles and recreation. But prices for motor vehicle insurance, airline fares and apparel fell. In the 12 months through September, the CPI increased 1.4 percent after rising 1.3 percent in August. Economists polled by Reuters had forecast the CPI climbing 0.2 percent in September and rising 1.4 percent year-on-year. Excluding the volatile food and energy components, the CPI rose 0.2 percent last month after increasing 0.4 percent in August. In the 12 months through September, the core CPI gained 1.7 percent, matching August’s increase. —Reuters