An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth. Friday’s report from the Commerce Department showed that prices rose 0.4% from August to September, the same as the previous month. And compared with 12 months earlier, inflation was unchanged at 3.4%.
Quick Read
- The Federal Reserve’s closely-watched inflation gauge indicated that price increases remained high in September.
- Prices rose 0.4% from August to September, mirroring the increase from the previous month.
- Year-over-year inflation remained at 3.4%.
- Persistent inflation and high interest rates have not deterred consumers, who continue to spend, further driving inflation.
- September’s price increase is above the Fed’s 2% annual inflation target.
- The Fed has previously raised its key interest rate to around 5.4% to control inflation.
- Annual inflation measured by the consumer price index has decreased from a peak of 9.1% in June of the previous year.
- The economy grew at an annual rate of 4.9% in the third quarter, driven by strong consumer spending.
- Consumer spending in September increased by 0.7%.
- Spending on services, especially international travel, housing, and utilities, saw significant growth.
- Core prices, excluding food and energy, rose by 0.3% from August to September, and year-over-year core inflation was at 3.7%.
- The Fed’s prediction for core inflation this quarter matches the current 3.7% rate, suggesting rates might remain unchanged for the remainder of the year.
- The strong job market has supported consumer spending, with wage growth outpacing inflation for most of the year.
- Overall income growth, which includes wages, interest income, and government payments, has decelerated.
- After adjusting for inflation, after-tax income decreased by 0.1% in September, marking the third consecutive monthly drop, which could impact future spending and economic growth.
The Associated Press has the story:
Americans face still-persistent inflation despite Fed’s rate hikes
Newslooks- WASHINGTON (AP)
An inflation gauge that is closely monitored by the Federal Reserve showed price increases remained elevated in September amid brisk consumer spending and strong economic growth.
Friday’s report from the Commerce Department showed that prices rose 0.4% from August to September, the same as the previous month. And compared with 12 months earlier, inflation was unchanged at 3.4%.
Taken as a whole, the figures the government issued Friday show a still-surprisingly resilient consumer, willing to spend briskly enough to power the economy even in the face of persistent inflation and high interest rates. Spread across the economy, the strength of that spending is itself helping to fuel inflation.
September’s month-to-month price increase exceeds a pace consistent with the Fed’s 2% annual inflation target, and it compounds already higher costs for such necessities as rent, food and gas. The Fed is widely expected to keep its key short-term interest rate unchanged when it meets next week. But its policymakers have flagged the risk that stronger growth could keep inflation persistently high and require further rate hikes to quell it.
Since March 2022, the central bank has raised its key rate from near zero to roughly 5.4% in a concerted drive to tame inflation. Annual inflation, as measured by the separate and more widely followed consumer price index, has tumbled from the 9.1% peak it reached in June of last year.
On Thursday, the government reported that strong consumer spending drove the economy to a robust 4.9% annual growth rate in the July-September quarter, the best such showing in nearly two years. Heavy spending by consumers typically leads businesses to charge higher prices. In Friday’s report on inflation, the government also said that consumer spending last month jumped a robust 0.7%.
Spending on services jumped, Friday’s report said, led by greater outlays for international travel, housing and utilities.
Excluding volatile food and energy costs, “core” prices rose 0.3% from August to September, above the 0.1% uptick the previous month. Compared with a year earlier, though, core inflation eased to 3.7%, the slowest rise since May 2021 and down from 3.8% in August.
A key reason why the Fed may keep rates unchanged through year’s end is that September’s 3.7% year-over-year rise in core inflation matches the central bank’s forecast for this quarter.
With core prices already at that level, Fed officials will likely believe they can “proceed carefully,” as Chair Jerome Powell has said they will do, and monitor how the economy evolves in coming months.
A solid job market has helped fuel consumer spending, with wages and salaries having outpaced inflation for most of this year. Yet Friday’s report showed that the growth in overall income — a category that, in addition to wages, includes interest income and government payments — has slowed. Adjusted for inflation, after-tax income slipped 0.1% in September, the third straight monthly decline. Shrinking incomes could weaken spending and growth in the months ahead.
