WASHINGTON–The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% in September on a seasonally adjusted basis, after increasing 0.6% in August, according to new data from the U.S. Bureau of Labor Statistics.
Over the last 12 months, the all items index increased 3.7% before seasonal adjustment.
“The index for shelter was the largest contributor to the monthly all items increase, accounting for
over half of the increase,” the BLS said. “An increase in the gasoline index was also a major contributor to the all items monthly rise. While the major energy component indexes were mixed in September, the energy index rose 1.5% over the month. The food index increased 0.2% in September, as it did in the previous two months. The index for food at home increased 0.1% over the month while the index for food away from home rose 0.4%.”
CUNA: Fed May Not Need to Raise Rates
Following release of the numbers, CUNA Senior Economist Dawit Kebede, said, “Headline inflation remained unchanged in September at 3.7% over the last 12 months, the same increase as in August. Core inflation, which excludes volatile food and energy items, decreased from 4.3% in August down to 4.1%. The index for services contributed the most to the monthly increase, followed by energy, and food items. On the other hand, the index for goods continued its decline for the fourth consecutive month.
“Housing inflation increased in September to 0.6% from 0.3% in August, accounting for half of the increase of the monthly headline inflation,” Kebede continued. “This is unexpected, as the impact of shelter on the overall inflation was anticipated to be muted at this time after showing declining trends in the past few months. Shelter is a lagged indicator in the inflation report, and some of the declines in housing prices observed early in the year are not yet reflected.
Moving Toward Target
“The declining core inflation indicates that prices are moving towards the Federal Reserve's target,” said Kebede. “The annualized core inflation rate for the last three months is now less than 3%. This coupled with declining wage growth and recent increases in bond yields, suggest that the Federal Reserve may not need more rate hikes to control prices.”
NAFCU: Fed Should ‘Tailor’ Policy
NAFCU Economist Noah Yosif is taking a similar view.
"Core inflation grew by 0.3% month-over-month, suggesting monetary policy has been effective in decelerating labor costs, restraining labor demand, and fostering the cooldown in prices the Federal Reserve has sought to realize, especially within core services,” said Yosif. “However, headline inflation grew by 0.4% month-over-month, compounding months of acceleration over the summer due to rising energy prices, an increasingly potent risk driven by geopolitical challenges in both Europe and the Middle East.
“While the Federal Reserve might be inclined to maintain its terminal rate given indications of progress on core inflation, it will almost certainly view the ongoing resurgence within headline inflation as grounds for maintaining a restrictive policy posture over the coming year,” Yosif continued. “Keeping rates higher for longer invariably diminishes the window of opportunity for a soft-landing, however; NAFCU believes a gradual cooldown in the labor market as well as consumption will provide the Federal Reserve adequate time to assess the trajectory of inflation and tailor monetary policy accordingly."
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