November 30, 2022

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High rent, food costs keep US consumer inflation ahead

High rent, food costs keep US consumer inflation ahead
  • Consumer prices rose 0.4% in September
  • CPI rose 8.2% year-on-year
  • Core CPI rose 0.6%; Jumps 6.6% YoY

WASHINGTON, Oct 13 (Reuters) – U.S. consumer prices rose more than expected in September as rents rose the most since 1990 and the cost of food soared, reinforcing expectations that the Federal Reserve will raise interest rates for a fourth time. by 75 basis points. next month.

The report from the Labor Department on Thursday also showed a measure of core inflation posting its biggest annual increase in 40 years as consumers also paid more for healthcare. The data came on the heels of last week’s strong employment report, which showed solid job gains in September and the unemployment rate slipped to its pre-pandemic low of 3.5%.

“This is not what the Fed wants to see six months into one of the most aggressive tightening cycles in decades,” said Sal Gutierre, chief economist at BMO Capital Markets in Toronto.

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The CPI rose 0.4% last month after rising 0.1% in August. Economists polled by Reuters had expected the consumer price index to rise 0.2 percent.

Food prices rose 0.8%, with the cost of food at home rising 0.7% amid increases in all six major food groups in grocery stores. Owner’s equivalent rent, a measure of how much homeowners will pay rent or earn from renting their property, rose 0.8%, the largest increase since June 1990.

Huge jumps offset a 4.9% drop in gasoline prices. But it is possible that gasoline prices have fallen to the bottom after the decision of the Organization of the Petroleum Exporting Countries (OPEC) and its allies last week to cut oil production. The war in Ukraine also poses an upward risk to food prices.

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Stubbornly high inflation, which is above the Fed’s 2% target, is not only a challenge to the US central bank but also a blow to President Joe Biden and Democrats’ hopes of retaining control of Congress in elections next month.

In the 12 months through September, the CPI rose 8.2% after rising 8.3% in August. The annual CPI peaked at 9.1% in June, the biggest advance since November 1981.

Financial markets have almost fully priced in the possibility that the Federal Reserve will raise interest rates by another three-quarters of a percentage point at its November 1-2 policy meeting, according to CME’s FedWatch Tool.

The US central bank raised the interest rate from a near-zero level in March to the current range of 3.00% to 3.25%. Policy makers at the September 20-21 meeting expected “inflation pressures to continue in the near term,” according to meeting minutes released on Wednesday.

US stocks opened lower. The dollar rose against a basket of currencies. US Treasury bond prices fell.

wide range pressure

Excluding the volatile food and energy components, CPI rose 0.6% in September, matching the rise in August. The so-called core consumer price index is largely driven by rising rental housing costs.

Pressure also comes from healthcare costs, which increased 0.8% as consumers paid more for doctor visits.

New car prices rose 0.7% as supply remained tight. Auto insurance also costs more than home furnishings and operations, personal care, education, and airfares. But clothing prices fell 0.3% and prices for used cars and trucks fell for the third month in a row.

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Core CPI jumped 6.6% in the 12 months to September, the largest number since August 1982, after rising 6.3% in August.

Government data on Wednesday showed the weakest reading in commodity prices for producers in nearly two and a half years in September. However, the transition from producer inflation to consumer inflation may take some time.

Some inflation pressures come from a tight labor market. While a separate report from the Labor Department on Thursday showed that the number of Americans filing new claims for unemployment benefits rose last week, that was likely due to Hurricane Ian, which cut a swath of destruction across Florida and Carolina at the end of September.

Initial claims for state unemployment benefits rose by 9,000 to a seasonally adjusted number of 228,000 for the week ended October 8. Economists had expected 225,000 orders for the last week.

Unadjusted claims jumped 32,275 to 199662. Claims rose by 10,368 in Florida. There were also significant increases in filings in New York, while claims in Puerto Rico remained high in the aftermath of Hurricane Fiona.

Regardless of the distortions caused by storms, the job market remains tight. There were 1.7 jobs for every unemployed person on the last day of August, and layoffs also remained low.

The minutes of the Federal Reserve’s September meeting also showed that policymakers “expected that supply and demand imbalances in the labor market would gradually diminish” and “that the transition to a softer labor market would be accompanied by an increase in the unemployment rate.”

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(Reporting by Lucia Mutikani) Editing by Chizu Nomiyama and Paul Simao

Our criteria: Thomson Reuters Trust Principles.