Inflation stayed high in September after picking up over the summer as steady gains in rent and other services offset another decline in used car prices and a smaller rise in gasoline and food costs.
Inflation data this week
Consumer prices overall rose 3.7% from a year earlier, similar to August’s increase, according to the Labor Department’s consumer price index.
On a monthly basis, prices increased 0.4% following a 0.6% rise in August that was fueled by a surge in pump prices.
What is core inflation right now?
Core prices, which strip out volatile food and energy items and which the Federal Reserve watches more closely as it weighs interest rate changes, remained high. They rose 0.3% last month after 0.2% bumps over the summer. The advance still lowered the annual increase to 4.1% from 4.3% in August, marking the smallest gain since September 2021.
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How long will it take for inflation to go down?
Annual inflation has slowed significantly after hitting a 40-year high of 9.1% in June 2022, including a sharp drop to 3% in the first half of 2023. But since then, the cost of some goods and services has accelerated or pulled back more slowly, pushing up the yearly rise.
Prices for items such as used cars and furniture have dropped as pandemic-related supply-chain snarls have been resolved. But the cost of services such as rent, car repairs and auto insurance, have continued to drift higher in part because of briskly rising employee wages.
As a result, driving down inflation to the Fed’s annual 2% target is becoming a tougher slog. Barclays expects inflation broadly to dip to 3.3% in December and 2.6% at the end of 2024. Core price gains are projected to drift down to 3.7% at the end of the year and 2.8% at the close of 2024.
Will the Fed raise rates again?
Barclays expects the Fed to raise its key interest rate once more this year, by a quarter percentage point, after lifting it by 5.25 points in 16 months.
Although price increases are moderating, costs are still high and many Americans say they aren’t feeling much relief.
Stanley Novack, 78, of Valencia, California, says he’s most frustrated by high gas and grocery costs. “It’s out there, wherever you go,” says Novack, who is semi-retired and works part-time as a hotel and restaurant consultant. “We’re not seeing it easing at all.”
He says he pays $6.50 a gallon for gas in California and as much as $135 for weekly groceries for him and his wife, up from $100 before the pandemic. “You just have to deal with it,” he says.
Will gas be cheaper in the future?
Gasoline prices rose 2.1% in September after surging 10.6% the previous month and they’re up 3% from a year earlier. Pump prices are well below their $5 peak in summer 2022 and are likely move lower in the short term following the busy summer driving season despite the Israel-Hamas war, which has pushed up oil prices.
Curious about inflation? We’ve got you covered.
USA TODAY explores the questions you and others ask about inflation and how it affects your life, from “What is inflation?” to “What happens during a recession?” For more answers to your questions about today’s report and other economic trends, keep reading:
How many times has the Fed raised rates?
The Fed raised its key rate at 10 meetings in a row starting in March 2022, the most aggressive run of rate hikes in four decades. It paused that streak in June, leaving the benchmark federal funds rate where it stood, but implemented another increase the following month lifting the rate by a quarter point to a range of 5.25% to 5.5%.
How does raising rates lower inflation?
The federal funds rate is what banks pay each other for overnight loans. If that rate rises, banks typically pass along that extra cost, meaning it becomes more expensive to borrow as rates increase on services and items ranging from credit cards to home equity lines. That’s why the funds rate is the primary tool used by the Federal Reserve to try and put the brakes on inflation.
When it costs more to borrow, businesses and consumers are less inclined to do it, and that means an overheated economy can cool and price increases may slow.
When is the next Fed meeting 2023?
The Fed’s policy arm meets next on Oct. 31-Nov. 1. It will announce its interest rate decision at 2 P.M. ET on Nov. 1.
The Fed’s final meeting of the year is Dec. 12-13.
U.S. inflation rate by month
The inflation rate has plunged, tumbling by more than half from its peak of 9.1% in June, 2022. But it’s still above the 2% target preferred by the Federal Reserve. Here’s where the U.S. inflation rate has stood each month since May 2022:
- May 2022: 8.6%
- June 2022: 9.1%
- July 2022: 8.5%
- Aug 2022: 8.3%
- Sept 2022: 8.2%
- Oct 2022: 7.7%
- Nov 2022: 7.1%
- Dec 2022: 6.5%
- Jan 2023: 6.4%
- Feb 2023: 6.0%
- Mar 2023: 5.0&
- Apr 2023: 4.9%
- May 2023: 4.0%
- June 2023: 3.0%
- July 2023: 3.2%
- August 2023: 3.7%
Why is CPI important?
The Federal Reserve watches two key measures of the economy, price stability and maximum employment, which are its main considerations in interest-rate decisions. The CPI gives the Fed guidance to assess whether prices are “stable.’’
CPI is also used to inflation-adjust things like Social Security payments and income tax brackets. It’s also the reference rate for some financial contracts, such as Treasury Inflation Protected Securities (TIPS).
What is the difference between CPI and core CPI?
Core prices leave out volatile food and energy items and therefore are a more accurate reflection of longer-term trends.
Where should we expect tamer prices?
September used car prices likely fell at least 2% from the prior month, while energy prices recorded a modest increase of 0.4% after a 5.6% jump in August, said Juneau. Retail gasoline prices, he said, were nearly flat last month.
Goldman Sachs economists forecast a 2.3% decline in used car prices and a 0.1% dip in new car prices last month.
What prices are still rising a lot?
Renters are still getting squeezed. Goldman Sachs economists see rents up 0.48% on the month, rising at about a steady pace. Shelter inflation, which includes home prices, rents and other lodging, comprises about a third of the consumer price index (CPI). However, Goldman says
Airfares are also expected to post a gain, some economists noted.
Will the Fed raise rates again this year?
It depends on the data.
The CME Fed watch tool that helps gauge the market’s expectation for a rate move puts the chances of a Fed rate hike at only 10%, but economists aren’t yet fully ruling one out, partly because the labor market remains strong. A strong job market puts money in people’s pockets, which can fuel spending and inflation.
“With the surprisingly-strong September job report intensifying the debate on the further hikes, the near-term policy trajectory will be highly sensitive to Thursday’s CPI,” Deutsche Bank economists said in a note.
The last time the Fed met in September, it held rates steady at a 22-year high of 5.25% to 5.5% but signaled another hike is likely this year amid still elevated inflation and a sturdy economy.
“Broadly, stronger economic activity means we have to do more with rates,” Fed Chairman Jerome Powell told reporters then.
He also said, separately, “we will continue to make our decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.”
What’s the difference between CPI and PPI?
CPI measures inflation as experienced by consumers going about their day-to-day lives, while the PPI, or producer price index, measures the average changes over time in the sale prices received by domestic producers for their output. PPI, often referred to as wholesale price inflation, is gleaned during an earlier phase of the production and marketing cycle and typically impacts CPI.
Core inflation, which assesses inflation but leaves out the more volatile prices of food and energy, is the other key price metric.
10-year Treasury yield
In bonds, the 10-year Treasury yield was 4.57% Thursday morning, prior to the release of the CPI.
2024 COLA Watch
Social Security recipients should find out Thursday how much of a raise they will get next year. That’s because the consumer price index report will contain data the Social Security Administration (SSA) will use to determine the cost-of-living adjustment or COLA for 2024.
The most recent projection is that Social Security payments will go up 3.2%.
Dow futures now
At 7:30 a.m. ET, futures tied to the broad market S&P 500 and tech-heavy Nasdaq rose 0.40%. Futures for the blue-chip Dow Jones Industrial Average traded up 0.34%.
What is the current inflation rate?
The annual overall inflation rate is currently 3.7%, but is expected to have slid by a tenth of a point in September.
Inflation is a “generalized rise in prices,” according to Josh Bivens, director of research at the Economic Policy Institute, a left-leaning think tank based in Washington D.C. The cost of items and services ranging from health care, to gas, to groceries can shift depending on inflation.
Demand pull inflation
When there are too few goods to meet the demand, prices are likely to rise, according to Investopedia. That disparity is called demand pull inflation.
The Department of Labor has a tool that enables consumers to find out shifts in their buying power.
What is CPI?
The Consumer Price Index (CPI) looks at the average change in prices for particular products and services over a period of time, according to the Bureau of Labor Services.
It’s one inflation measure that the Fed and the economist use as a barometer to gauge price stability. The Fed’s preferred inflation gauge is the Personal Consumption Expenditures Price Index, or PCE, prepared by the Bureau of Economic Analysis (BEA). The next PCE report for September is due Oct. 27.
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