In September, the cost of housing and other needs increased pressure on households, wiping out pay raises for many workers, and ensuring that the Federal Reserve would continue aggressively hiking interest rates.
In September, consumer prices increased 8.2% over the same month last year, the government reported on Thursday. Prices rose 0.4% from August to September on a monthly basis after rising 0.1% from July to August.
Core inflation, which is measured without the erratic categories of food and energy, increased last month, indicating that the Fed’s five rate increases this year have not yet had much of an impact on reducing inflation pressures. From August to September, core inflation increased by 0.6%, and it increased by 6.6% from one year earlier. The annual core figure has increased by the most in 40 years. A clearer picture of underlying price patterns is often provided by core prices.
The Dow Jones Industrial Average futures moved from a drop of several hundred points to 400 points in a matter of seconds as major U.S. markets abruptly swung lower. Additionally, European markets fell.
After a campaign season in which skyrocketing prices have increased public fear, with many Republicans blaming President Joe Biden and congressional Democrats, Thursday’s report represents the final U.S. inflation figures prior to the Nov. 8 midterm elections.
Despite solid job growth and historically low unemployment, inflation has increased families’ prices for groceries, rent, and utilities, among other things. This has made life difficult for many people and deepened their pessimism about the economy.
According to a recent study by The Associated Press-NORC Center for Public Affairs Research, Americans are becoming more pessimistic about their financial situation as the election draws closer. Approximately 46% of Americans currently, up from 37% in March, say their personal financial position is poor. Contrast that significant decline with the measurements that had remained largely constant during the outbreak.
The Fed’s plans to maintain raising rates quickly in an effort to bring inflation under control are not likely to be altered by the September inflation figures. Since March, the Federal Reserve has increased its benchmark short-term rate by 3 percentage points, the quickest rate of increases since the early 1980s. These price hikes aim to boost borrowing rates for business, vehicle, and home loans while also reducing inflation by slowing the economy.
The minutes from the Fed’s most recent meeting, which took place in late September, revealed that many decision-makers are still not seeing any results in their efforts to combat inflation. The policymakers predicted that throughout the course of their upcoming two meetings in November and December, they would increase their benchmark rate by an extra 1.25 percentage points. The Fed’s benchmark rate would reach its highest level in 14 years if that happened.
Economists anticipate used car prices to decrease or at least contain inflation in the upcoming months along with lower gas prices. Although the declines in wholesale used automobile prices have been going on for the majority of this year, consumer inflation numbers have not yet reflected them. (Used car prices have risen in 2021 as a result of lower production due to factory closures and supply chain issues.)
After building up extra stockpiles of clothing, furniture, and other items earlier this year, large merchants have already begun to offer early discounts for the holiday shopping season. These price reductions may have prevented or reduced inflation in September.
Walmart has announced that it will provide significant discounts on products like toys, home goods, electronics, and cosmetics. Holiday sales at Target started earlier this month.
However, the cost of services, particularly rent and housing, continues to be expensive and is unlikely to decrease any time soon. Even now, the cost of veterinary, educational, and health care services is rising quickly.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, observed in remarks this week that increases in the price of services “tend to be more enduring than increases in the prices of products.”
Rent increases provide a challenging problem for the Fed. Rents for brand-new leases may be starting to drop, according to real-time data from websites like ApartmentList.
However, the government’s metric records all rent payments, not just those for brand-new contracts, and the majority of them remain constant month after month. The declines in new leases may take a year or more to show up in government data, according to economists.