Inflation reached its highest level since January in September
Inflation reached the highest level since the start of the year in September, according to data released by the US economy on Friday US Bureau of Labor Statistics (BLS).
The delayed report showed that headline inflation rose to 3.0% year-on-year in September, the third straight month of higher inflation and the highest inflation rate since January this year. Compared to a month earlier, the index rose 0.3% at a seasonally adjusted pace, compared with a monthly increase of 0.4% in August.
The food and energy index (all items minus) also rose 3.0% during the twelve-month period ending in September. Taken alone, energy and food rose by 2.8% and 3.1% respectively over the past year.
Month-on-month, the gasoline index showed the largest increase in September, up 4.1%. The BLS said this increase was the biggest factor driving the monthly jump in the all items index.
On a monthly basis, the food and energy index (all items minus) rose by 0.2% in September.
The shelter index showed a significant increase, increasing by 3.6% compared to the previous year. Over the past year, the rental index has increased by 3.5%, while the index for owners’ equivalent rent has increased by 3.8% annually.
Compared to a month ago, the shelter index rose just 0.2%, compared to a monthly gain of 0.4% in August. Within the overall housing index, the owner’s equivalent rent index rose 0.1% in September, the smallest increase in that index in a single month since January 2021. Meanwhile, the rental index rose 0.2% over the course of September.
Clear MLS Chief Economist Lisa Strutevant noted that this report comes at a particularly important time, as the Federal Reserve is preparing to meet next week to consider another rate cut without the help of the September employment report, weekly unemployment claims data and retail sales reports.
“Despite the rise in inflation last month, it is still highly likely that the Fed will cut rates by a quarter of a percentage point next week,” she said in a statement. “The labor market is cooling, and without additional data showing otherwise, there is little reason for the Fed to reverse the widely expected rate cut.”
In contrast to Sturtevant, Sam Williamson, a senior economist, has joined First Americanstill believes the Fed will cut rates.
“Despite the rebound, the Fed is still expected to prioritize addressing growing signs of weakness in the labor market over further progress in the fight against inflation and lowering interest rates at its meeting next week,” Williamson said in a statement. “However, officials remain divided on how aggressively to ease, making a December cut far from certain and dependent on incoming data.”
However, the two economists agree on one thing: the softer mortgage rates this fall have helped improve affordability.
“Lower rates promote affordability and could bring some buyers into the market this fall,” Sturtevant said. “But as prices for gas, food and other household expenses continue to rise, potential buyers will still be cautious.”
