Inflation points to continued rate hikes
WASHINGTON – Inflation in the United States accelerated in September, with the cost of housing and other necessities wiping out pay gains and ensuring the Federal Reserve will keep raising interest rates aggressively.
Consumer prices rose 8.2% in September compared with a year earlier, the government said Thursday. On a month-to-month basis, prices increased 0.4% from August to September after having ticked up 0.1% from July to August.
Excluding the volatile categories of food and energy, so-called core inflation soared far above expectations last month – a sign that the Fed’s five rate hikes this year have so far done little to cool inflation pressures. Core inflation climbed 0.6% from August to September and 6.6% over the past 12 months. The yearly core figure is the biggest increase in 40 years. Core prices typically provide a clearer picture of underlying price trends.
Major U.S. markets swung sharply lower, with the Dow Jones Industrial Average falling 400 points, or 1.4%, in early trading. Markets in Europe tumbled as well.
Thursday’s report represents the final U.S. inflation figures before the Nov. 8 midterm elections after a campaign season in which spiking prices have fueled public anxiety, with many Republicans casting blame on President Joe Biden and congressional Democrats.
Higher prices for many services – health care, auto repair and housing, among others – drove inflation last month. A measure of housing costs jumped 0.8% in September, the biggest increase in 32 years. The Fed’s rate hikes have sharply raised mortgage rates and caused home prices to fall. But declining house prices will take time to feed through into the government’s measure.
“The primary driver of inflation has rotated away from goods prices and to services,” said Eric Winograd, U.S. economist at AB. “Services inflation is heavily influenced by wages, and so it is going to take a meaningful weakening of the labor market to bring inflation to heel.”