US inflation continued to slow in September, latest CPI data shows

U.S. inflation hit its lowest point since February 2021 last month, paving the way for another rate cut from the Federal Reserve and adding to the stream of encouraging economic data that emerged in the final weeks of the campaign presidential.

The consumer price index rose 2.4% in September from 12 months earlier, slightly above the 2.3% expected but lower than the 2.5% year-on-year increase recorded in August, according to economists surveyed by FactSet, a data provider. Such a low figure, likely due to lower gasoline prices and an uptick in food prices, barely exceeds the Fed's 2% inflation target. Just over two years ago, inflation peaked at 9.1%.

The improving inflation data follows a relatively healthy jobs report released last week, which showed that hiring accelerated in September and the unemployment rate fell from 4.2% to 4.1%. The government also said the economy grew at a solid 3% annually in the April-June quarter. And growth likely continued at about that pace in the just-completed July-September quarter.

Slowing inflation, steady hiring and solid growth could erode former President Donald Trump's economic advantage in the presidential campaign, as measured by public opinion polls. In some surveys, Vice President Kamala Harris tied with Trump on the question of who would best manage the economy, after Trump decisively led President Joe Biden on that issue.

“The good news is that the trend remains largely disinflationary, but the bad news is that services inflation remains a problem,” Olu Sonola, head of U.S. economic research at Fitch Ratings, said in a note. “Inflation is dying, but not dead.”

New study finds job security remains a top concern for Americans 04:34

At the same time, most voters still give relatively poor marks to the economy, mainly due to the cumulative rise in prices over the past three years.

For the Fed, last week's much stronger-than-expected jobs report fueled some fears that the economy might not cool enough to sufficiently slow inflation. The central bank cut its benchmark rate by a whopping half-point last month, its first rate cut of any magnitude in four years. Fed policymakers also indicated they were considering two additional quarter-point rate cuts in November and December.

Fed plans further interest rate cuts

In remarks this week, many Fed officials said they were still willing to continue cutting the policy rate, but at a deliberate pace, indicating that another half-point cut is unlikely. likely.

The Fed “should not rush to cut” its benchmark rate “but rather proceed gradually,” Lorie Logan, president of the Dallas branch of the Federal Reserve, said in a speech Wednesday.

Inflation in the United States and many countries in Europe and Latin America has risen amid the economic recovery from the pandemic as COVID shuttered factories and clogged supply chains. Russia's invasion of Ukraine has worsened energy and food shortages, pushing inflation higher. It peaked at 9.1% in the United States in June 2022.

Excluding volatile food and energy costs, so-called core prices likely rose 0.3% from August to September, according to FactSet, and are likely 3.2% above their one-year level. earlier. Although such a figure would be faster than what is in line with the Fed's 2% target, economists expect core inflation to calm down somewhat by the end of the year. year, as rent and property prices rise more slowly.

Economists at Goldman Sachs, for example, forecast that core inflation will fall to 3% by December 2024. Few analysts expect inflation to rise further unless conflicts in the Middle East is getting worse dramatically.

Wages rebound

Although rising prices have hurt the economies of many Americans, wages and incomes are now rising faster than costs and should make it easier for households to adjust. Last month, the Census Bureau reported that inflation-adjusted median household income – the level at which half of households are above and half below – increased by 4% in 2023 , enough to return revenues to their pre-pandemic peak.

In response to rising food prices, many consumers have shifted away from big brands to private labels or have started shopping more at discount stores. These changes have put increased pressure on packaged food companies, for example, to slow their price increases.

This week, PepsiCo announced that its sales volumes had fallen after imposing steep price increases on its drinks and snacks.

“The consumer is re-evaluating their habits,” Ramon Laguarta, CEO of PepsiCo, said Tuesday.

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