Mixed Signals on Inflation in September

Mixed Signals on Inflation in September

© Paulo Whitaker / Reuters

The rate of inflation eased a bit in September, as prices rose 0.4% from the previous month, down from the 0.6% rate recorded the month before, according to government data released Thursday. On an annual basis, however, the rate of inflation was unchanged, with September’s year-over-year rate holding steady at 3.7%, the same as in August.

The core inflation rate — a measure closely watched by the Federal Reserve that strips out volatile food and fuel prices — also told a mixed story. Core prices rose 0.3% in September, the same as in August. On an annual basis, though, core prices rose 4.1%, easing slightly from the 4.3% rate recorded the month before.

Overall, the inflation numbers are “a mixed bag,” Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, told the Associated Press. “It still suggests that we have exited the higher inflation regime of the pandemic, but we’re still elevated.”

Joseph Brusuelas, chief economist at the consulting firm RSM, said the major drivers of inflation in September were energy and housing costs. “Both illustrate the difficulties in restoring price stability, and given growing risks to oil prices linked to the outbreak of hostilities in the Middle East, that challenge has only grown,” he wrote.

At the same time, those sources of inflation are slowing down in the most recent data, suggesting that inflation will continue to fall along a bumpy path in the coming months.

The latest inflation data isn’t expected to alter the Fed’s campaign of anti-inflationary tightening, and most analysts expect the central bank to hold steady on interest rates at its next meeting, even as it continues to remain vigilant for any signs of backsliding.

“The Fed can for sure claim progress on inflation,” Lara Rhame, chief U.S. economist at FS Investments, told The Wall Street Journal. “But they definitely can’t claim victory.”

Fed Governor Christopher Waller said Wednesday that economic conditions are still moving in the right direction as the central bank pursues its goal of 2% inflation. “Financial markets are tightening up, and they are going to do some of the work for us,” he said. “We’re in this position where we kind of watch and see what happens.”