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Key inflation report: prices aren’t coming back to earth anytime soon




Consumer price inflation, one of the main indicators of inflation, rose 0.4% in September, seasonally adjusted, faster than in August but slower than in previous months, the Bureau of Labor Statistics reported Wednesday.

Rising food and shelter prices contributed more than half of the increase, while prices for new cars, home furnishings and car insurance also climbed. The index that tracks new car prices rose 8.7% in the 12 months ending in September, marking the biggest jump since 1980.

The increase in housing costs, which includes rents and rent equivalents for landlords, is cause for concern, said economist Sung Won Sohn.

“Shelter costs have increased little over the past year, but continue to climb,” he wrote in a note. “The government is phasing out rent increases over time. It is poised to become a major source of inflation in the coming months.”

Overall, inflation stood at 5.4% over the 12-month period ended in September. Excluding food and energy costs, which tend to be more volatile, prices rose 4% over the same period, the same pace as in August.

The annual inflation rate in the United States is the highest in Summer, which was the highest annual inflation rate since 2008.

More expensive food and cheaper plane tickets

Food prices jumped 0.9% in September, much more than in August, as grocery store prices jumped across the board.

But not everything has become more expensive in America. Plane tickets, for example, keep falling: the price index for plane tickets fell 6.4% in September, after a drop of 9.1% in August.

This isn’t great for airlines, and it’s happening even as travel demand continues to recover from the worst of the pandemic. Delta (OF) said in his earnings wednesday that the company expected to feel price pressure due to rising energy costs.

Energy prices rose 1.3% last month, the fourth consecutive increase. Gas prices rose 1.2%, less than the previous month. Over the past 12 months, the energy price index has increased by almost 24.8% and the gas index by 42.1%.

With more volatility in the energy market this month and U.S. oil prices surpassing $ 80 for the first time in nearly seven years earlier this week, energy prices could contribute more to the inflation in October.

What does this mean for the Fed?

Inflation has exceeded the Federal Reserve’s target by around 2% for what appears to be a long time now. Even so, the central bank has been steadfast in its view that the price spikes that have become a hallmark of the pandemic economy will only be temporary.

For consumers, this is really not the case. The prices of various products jumped last year, remember the huge soaring used car prices? and have since come down from their peaks. But overall, costs remain high this year.

So, is the Fed simply wrong in its assessment?

It is still a little early to tell. Even though American workers have felt the pandemic pressure on prices for some time, it hasn’t been long enough for Fed policymakers to really sound the alarm bells.

That said, the Fed has signaled that it is preparing to cancel its massive recovery plan in the event of a pandemic. That could reduce some of the pressure on US inflation, but a lot of the pressure on prices comes from supply chain issues lurking around the world.
The The White House gets involved to address some of the supply chain issues, President Joe Biden meeting with senior officials and stakeholders to discuss efforts to address global transportation bottlenecks. Biden will deliver remarks Wednesday afternoon.




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