In the United States, consumer prices rose more than predicted in September, while weekly unemployment claims increased.
- People shop at supermarkets as inflation continues to rise.
- The consumer price index increased 0.4% last month after increasing 0.1% in August.
- The underlying inflation is being driven mostly by increased rental housing expenses.
- High inflation and a tight labour market enable the Federal Reserve of the United States to retain its aggressive monetary policy.
WASHINGTON: Consumer prices in the United States rose more than anticipated in September, and underlying inflation pressures remained high, bolstering predictions that the Federal Reserve would raise interest rates by 75 basis points again next month.
According to the Labor Department, the consumer price index increased 0.4% last month after increasing 0.1% in August. Reuters surveyed economists, who predicted a 0.2% increase in the CPI.
The CPI grew 8.2% year on year through September, after an 8.3% rise in August. The annual CPI reached 9.1% in June, the highest level since November 1981.
Despite further moderation as supply chains loosen and oil prices fall from spring highs, inflation remains far over the Fed’s 2% objective.
Following the Organization of Petroleum Exporting Countries and allies’ agreement to restrict oil output last week, gasoline prices are likely to have bottomed. Russia’s conflict against Ukraine raises the prospect of higher food costs.
For the time being, persistently high inflation and a tight labour market enable the US central bank to retain its aggressive monetary policy approach. Last week, the government announced significant job creation in September, with the jobless rate dropping to a pre-pandemic low of 3.5%, down from 3.7% in August.
According to CME’s FedWatch Tool, financial markets have nearly priced in another three-quarter percentage point rate rise at the Fed’s November 1-2 policy meeting.
Since March, the Fed has raised its policy rate from near zero to the current range of 3.00% to 3.25%. The minutes of the Federal Reserve’s September 20-21 meeting, released on Wednesday, revealed that policymakers “anticipated inflation pressures to prevail in the near term.”
The CPI rose 0.6% in September after gaining 0.6% in August, excluding volatile food and energy components. In the year to September, the core CPI increased by 6.6%. In August, the core CPI increased 6.3% year on year.
The underlying inflation is being driven mostly by increased rental housing expenses. According to government statistics released on Wednesday, September had the lowest reading in producer core goods prices in over two and a half years. However, the transition from producer to consumer inflation is likely to take some time.
The tight labour market is driving some of the inflationary pressures. According to a second Labor Department data released on Thursday, the number of Americans submitting new applications for unemployment benefits grew marginally last week.
For the week ending October 8, initial claims for state unemployment benefits increased by 9,000 to a seasonally adjusted 228,000.
Economists anticipated 225,000 applications for the most recent week. The labour market remains constrained. On the final day of August, there were 1.7 job vacancies for every jobless individual, and layoffs remained low.
According to the minutes of the Fed’s September meeting, officials “expected that the supply and demand imbalances in the labour market would gradually reduce,” and “that the shift toward a softer labour market would be followed by a rise in the unemployment rate.”
