Inflation proves stronger than expected in September

High housing and food costs help keep overall inflation the same as in August

Inflation proves stronger than expected in September

High housing and food costs help keep overall inflation the same as in August
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  • The September inflation rate rose 0.2%, higher than the 0.1% expected.
  • The inflation rate for the past year was 2.4%, the smallest 12-month increase since February 2021.
  • The index for shelter rose 0.2% and the index for food rose 0.4%.

Inflation proved stickier than many experts had thought in September as the overall Consumer Price Index (CPI) was slightly higher than forecasted for the month at 0.2%, according to the U.S. Bureau of Labor Statistics.

The inflation rate, which was the same as August, surprised many Wall Street analysts who had expected price increases to cool to 0.1% for the month. Food prices, which rose 0.4% for the month, were a main culprit in the higher-than-expected inflation rate. Food has gone up 2.3% over the last year. Inflation for all items other than food and energy rose 0.3%, the same as in August. Inflation for all items, less food and energy, rose 3.3% over the past 12 months.

Another leading factor was housing costs, which were up 0.2%. Together, the two indicies accounted for 75% of the inflation increase, according to the bureau. Other indices that rose in September included motor vehicle insurance, medical care, apparel and airline fares.

On the bright side, energy costs, which include gasoline, fell 1.9% for the month, after declining 0.8% in August. Over the past year, the energy index has decreased 6.8%.

The disappointing inflation results led Sam Williams, the senior economist at First American Financial Corporation, to predict the Federal Reserve will need more data before moving forward with planned rate cuts.

“Although September CPI came in warmer than expected, with core CPI particularly surprising to the upside, labor market data remains crucial for the Fed, likely making next month’s payroll data key to determining the pace and extent of further Fed easing,” Williams said.

Lawrence Yun, the chief economist and senior vice president of research at the National Association of Realtors, was more confident that the Fed will stick with its schedule to reduce interest rates during the next year.

“CPI is a bit sticky but still decelerating. The Federal Reserve is still down on track for six to eight rounds of rate cuts through 2025,” Yun said. “But most of the decline in mortgage rates has pretty much already occurred. Homebuyers will be lucky to see 5.5% over the next 12 months.”

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