Inflation rose more than expected in September as prices continued to rise

Inflation rose more than expected in September as persistent prices continued to pressure American households and President Biden’s political headache worsened just a month before the midterm elections.

The Labor Department said Thursday that the Consumer Price Index, a broad measure of the prices of everyday goods including gasoline, groceries and rents, rose 0.4% in September from the previous month. Prices are up 8.2% year over year.

Those numbers were higher than the 8.1% headline and 0.2% monthly increase that Refinitiv economists had expected, a worrying sign for Federal Reserve It seeks to dampen price gains and tame consumer demand with a aggressive campaign to raise interest rates.

In a more disturbing development refers to the primary inflationary pressures The economy remains strong, and core prices – which exclude the most volatile measures of food and energy – rose 0.6% in September from the previous month. Compared to the same time last year, core prices jumped 6.6%, the fastest since 1982.

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Economists expected core prices to rise 0.5% on a monthly basis and 6.5% from the previous year.

Stocks fell on the surprisingly hot report, with the Dow Jones Industrial Average dropping more than 500 points. The S&P 500 is down 2.10% and the Nasdaq Composite is down 2.80%.

Severe inflation has put severe financial stress on most American families, who are forced to pay more for daily necessities such as food and rent. Low-income Americans bear the burden disproportionately, as their already burdensome salaries are greatly affected by price fluctuations.

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Although families have continued to see some delay in the past month in the form of Low gas pricesdown 4.9% in September from the previous month, other price gains proved persistent and stubbornly high.

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Grocery costs rose 0.7%, putting the 12-month increase up at 13.0%. Consumers paid more for items such as grain, chicken, milk, and fresh vegetables.

Grocery store inflation in the United States

Thomas Calomiris, a third-generation product seller, weighs an onion in the Eastern market as the United States struggles with rising inflation on May 20, 2022, in Washington, DC (Photo by BRENDAN SMIALOWSKI/AFP via Getty Images/Getty Images)

Shelter costs, which account for about 40% of the increase in core inflation, have risen 6.6% over the past year, the fastest since February 1991.

Rental costs jumped 0.8% during the month and 6.7% year over year. Rising rents is a worrying development because rising housing costs directly and severely affect family budgets. Another data point that measures the amount homeowners would pay in equivalent rent if they did not purchase their home, rose 0.8% in September from the previous month.

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“The composition of the inflation reading is probably more concerning than the overall figure,” said Sima Shah, chief global strategist at Major Asset Management. “The increases in the Shelter and Medicare indices, the most urgent sectors in the CPI basket, confirm that price pressures are very stubborn and will not subside without a Fed fight.”

As food and shelter costs continue to rise, American families face increasing financial pressure. Average hourly wages actually decreased 0.1% in September based on the inflation rate. Compared to the previous year, earnings were down 3%, according to a separate BLS report.

Rampant inflation and the rapid disintegration of Americans’ purchasing power have become Biden’s main political opponents ahead of the November midterm elections, in which Democrats are expected to lose their already slim majority. Surveys show that Americans see inflation as the biggest problem facing the country — and many families blame Biden for the price hike.

Federal Reserve Chairman Jerome Powell

Jerome Powell, Chairman of the US Federal Reserve, speaks during a press conference following the Federal Open Market Committee meeting in Washington, DC, US, on Wednesday, May 4, 2022. (Photo: Al Drago / Bloomberg via Getty Images / Getty Images)

The president has blamed greedy companies, supply chain bottlenecks and other disruptions the pandemic is causing in the economy, as well as the Russian war in Ukraine. Most economists now agree that unprecedented levels of government stimulus and a stronger-than-expected recovery from the pandemic have also played at least some role in exacerbating price hikes.

The report will also have significant implications for Federal Reserve, which has embarked on one of the fastest tightening tracks in decades. Policy makers have already approved five consecutive price increases, including three in a row of 75 basis points, and have shown no signs of slowing.

After the hotter-than-expected inflation report for September, the central bank is widely expected to approve a fourth straight increase of 75 basis points when policymakers meet at the beginning of November.

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“The CPI came out hot, effectively ensuring the Fed will raise 75 basis points next month, and at least 50 basis points in December,” said Robert Frick, an economist at Navy Federal Credit Union. “And we need to prepare for more bad news in October and November, as high oil prices are likely to swing again from a cut to an increase in inflation.”

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