September’s CPI report indicates ‘progress’ on inflation

On a seasonally-adjusted basis, overall consumer prices rose 0.4 percent in September, with the overall consumer price index (CPI) rising 3.7 percent year-over-year. NAFCU Economist Noah Yosif analyzed the data in a new Macro Data Flash report.

“Core inflation grew by 0.3 percent 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 percent 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.”

Core prices (excluding food and energy costs) rose 0.3 percent last month. Year-over-year core CPI growth was 4.1 percent. Energy prices increased 1.5 percent during September. From a year ago, energy prices were down 0.5 percent. Food prices rose 0.2 in September and were up 3.7 percent over the year.

“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. 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,” Yosif concluded.


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