Key gauge of US inflation kept painful level in Sept.

Slowing in pay growth may signal price pressures are easing

WASHINGTON — A measure of inflation that is closely monitored by the Federal Reserve remained painfully high last month, the latest sign that prices for most goods and services in the United States are still rising steadily.

Friday’s report from the Commerce Department showed that prices rose 6.2% in September from 12 months earlier, the same year-over-year rate as in August.

Excluding volatile food and energy costs, so-called core prices rose 5.1% last month from a year earlier. That’s faster than the 4.9% annual increase in August, though below a four-decade high of 5.4% reached in February.

The latest price figures come just as Americans have begun voting in midterm elections in which Democrats’ control of Congress is at stake and inflation has shot to the top of voters’ concerns. Republicans have heaped blame on President Joe Biden and congressional Democrats for the skyrocketing prices that have buffeted households across the country.

The persistence of high inflation, near the worst in four decades, has intensified pressure on the Fed to keep aggressively raising its key short-term interest rate to try to wrestle rising prices under control. Last month, the Fed raised its key rate by a substantial three-quarters of a point for a third straight time, and next week it’s expected to do so for a fourth time.

Higher pay is helping maintain spending for many workers. Wages and benefits rose 5% in the July-September quarter from a year ago. That was a healthy gain, just below a two-decade high of 5.1% reached in the AprilJune quarter.

Still, there are signs that pay growth is cooling a bit. On a quarterly basis, it rose 1.2% from the April-June quarter to the July-September period. Yet that marked a second straight quarterly slowdown after compensation growth had reached a 20-year high of 1.4% in the first three months of 2022.

Fed Chair Jerome Powell has previously mentioned the wage figures released Friday, known as the employment cost index, as among the most important measures of worker pay. Since the pandemic recession ended, the index has soared, with companies offering more generous pay and benefits to attract and keep workers.

Businesses often pass on the cost of that higher pay to their customers in the form of price increases, thereby worsening inflation. As a result, the slight slowing in pay gains may be welcomed by the Fed as a sign that inflation pressures are easing.

Though consumers spent at a solid pace last month, there were signs in Friday’s report that this trend might not last. Many Americans are tapping their savings to keep up with inflated costs for groceries, rents and utilities or are taking on more credit card debt. The saving rate fell to 3.1%, just above 3% in June, which was the lowest level in 14 years.

Americans, on average, built up their savings during the pandemic, a time when many people stayed home, postponed travel and vacations and dined out less.