The Consumer Price Index (CPI) increased in September, owing to rising food and energy costs.

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The Consumer Price Index (CPI) increased in September, owing to rising food and energy costs.

The Department of Labor announced on Wednesday that inflation jumped again in September as increases in food and energy prices outpaced drops in other categories.

According to fresh data from the Bureau of Labor Statistics, food costs increased by 0.9 percent, while energy prices increased by 1.3 percent. The Consumer Price Index (CPI), a key indicator of inflation, increased by 0.4 percent for all categories, exceeding the previous reading of 0.3 percent as well as forecasts for the same result.

Food and energy costs are among the most volatile indicators of inflation, but their recent surge raises doubts about whether inflation in the United States is still transitory or here to stay. Year-on-year end inflation was 5.4 percent, the highest since January 1991, which is a warning indicator for policymakers.

If food and energy prices are omitted from the CPI, the increase is only 0.2 percent, bringing year-end inflation to 4%. Prices in other categories, such as used vehicles and airline tickets, have also dropped significantly.

After peaking at the beginning of the summer, used automobile prices began to decline in August. Airline rates fell by 6.4 percent, extending a trend that began last month with a 9.1 percent drop.

As decisionmakers at the Federal Reserve and within President Joe Biden’s cabinet keep their finger on the pulse of the economy, the latest inflation data will be a crucial signal.

According to Chairman Jerome Powell, who spoke at the annual retreat for central bankers in Jackson Hole in August, the Fed concedes that inflation has been rising but claims that it is just temporary.

The Fed’s goal has been to keep inflation at a modest level of roughly 2% per year. A rapid or sustained rise in inflation could push the Fed to move sooner than it would like to raise interest rates.

While the Fed expects to reduce its monthly asset purchases to $120 billion starting next month, it has been less explicit about when it could raise interest rates from their present lows.

The White House of President Joe Biden shares this viewpoint. The Biden administration is concerned that the economic recovery from COVID-19 will be hampered by the Delta variation and greater inflation.

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