The recent pickup in inflation has led some economists to postpone their projections for when the Federal Reserve will begin cutting interest rates.
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The economy keeps growing, defying widespread fears from a year ago that 2023 would bring a recession, a consequence of the much higher borrowing rates the Fed engineered.
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A growing body of analysts and researchers see a pattern of companies using unusual disruptions as an excuse to raise prices for their goods and services, thereby allowing them to expand profit margins.
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The stock market dropped in 2022. So did the unemployment rate. Except in Indiana, where in both cases, the numbers crept up.
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One cautionary note is that grocery-store sales barely rose last month, a sign that many Americans might still be struggling to adapt to food prices that are still much higher than they were three years ago.
After Powell’s cautious remarks Thursday, traders estimated the likelihood of a Federal Reserve rate cut in December at just below 59%, down from 83% a day earlier.
The bulk of October’s monthly increase was driven by a rise in shelter costs, which were up 0.4 percent last month and grew by 4.9 percent annually.
While prices for most goods have been falling throughout the year, inflation for food services and home and auto insurance remain stubbornly high.
The Federal Reserve’s preferred measure of underlying U.S. inflation posted its biggest monthly gain since April, bolstering the case for a slower pace of interest-rate cuts following last month’s outsize reduction.
Excluding volatile food and energy costs, “core” prices, a gauge of underlying inflation, remained elevated in September, driven up by rising costs for medical care, clothing, auto insurance and airline fares.
The ongoing decline in inflation makes it even more likely that the Federal Reserve will cut its key benchmark rate further in the coming months.
The rate cut, the Fed’s first in more than four years, reflects its new focus on bolstering the job market, which has shown clear signs of slowing.
At issue is how fast the Fed wants to lower interest rates to a point where they’re no longer acting as a brake on the economy—nor as an accelerant. Where that so-called “neutral” level falls isn’t clear.
The so-called core consumer price index, which excludes food and energy costs, increased 0.3% from July and 3.2% from a year ago, Bureau of Labor Statistics figures showed Wednesday.
The Commerce Department had previously estimated that the nation’s gross domestic product—the total output of goods and services—expanded at a 2.8% rate from April through June.
Federal Reserve Chair Jerome Powell emphasized that inflation, after the worst price spike in four decades inflicted pain on millions of households, appears largely under control.
For nearly a year, cooling inflation has provided gradual relief to America’s consumers, who were stung by the price surges that erupted three years ago, particularly for food, gas, rent and other necessities.
Some of America’s largest companies say their customers are increasingly seeking cheaper alternative products and services, searching for bargains or just avoiding items they deem too expensive.
Friday’s report from the Labor Department showed that employers added 35% fewer jobs than forecasters had expected and the unemployment rate hit its highest level since October 2021.
Higher wages and benefits are good for employees, but slower pay growth will likely reassure Federal Reserve officials that inflation is steadily falling back to their 2% target.
Inflation has fallen steadily for the past year. Even so, the costs of everyday necessities like groceries, gasoline and rent remain much higher than they were three years ago.
In his remarks Monday, Federal Reserve Chair Jerome Powell stressed that the Fed did not need to wait until inflation actually reached 2% to cut borrowing costs.
The increase, the sharpest year-over-year increase since March 2023, comes at a time when other price indicators are showing that inflation has continued to ease.
PepsiCo’s and Conagra’s latest quarterly results suggest that consumers frustrated by rising prices are now spending less on established brands, particularly in the snack and soda aisles.
