Prices that consumers pay for a wide variety of goods and services increased at a slightly faster than expected pace in September, keeping inflation in the spotlight of policymakers.
The consumer price index, a closely followed inflation gauge, increased 0.4% on the month and 3.7% from a year ago, according to a Labor Department report Thursday. That compared to respective Dow Jones estimates of 0.3% and 3.6%.
Excluding volatile food and energy prices, so-called core CPI increased 0.3% on the month and 4.1% on a 12-month basis, both exactly in line with expectations. Policymakers place more weight on the core numbers as they tend to be better predictors of long-term trends.
In keeping with recent trends, shelter costs were the main factor in the inflation increase. The index for shelter, which makes up about one-third of the CPI weighting, accelerated 0.6% for the month and 7.2% from a year ago.
Energy costs rose 1.5%, including a 2.1% pickup in gasoline prices and 8.5% on fuel oil, and food was up 0.2% for the third month in a row.
Services prices, considered a key for the longer-run direction for inflation, also posted a 0.6% gain excluding energy services, and were up 5.7% on a 12-month basis. Vehicle prices were mixed, with new vehicles up 0.3% and used down 2.5%.
Markets showed only a modest reaction to the report. Stock market futures were off their highs but still mostly positive while Treasury yields came off previous lows, with longer-duration notes little changed.
The CPI increase meant worker wages fell in real terms.
Real average hourly earnings fell 0.2% on the month, owing to the difference between the inflation rate and the 0.2% gain in nominal earnings, the Labor Department said in a separate report. On a yearly basis, earnings were up 0.5%.
In other economic news Thursday, the Labor Department reported that initial jobless claims totaled 209,000, unchanged from the previous week and just below the 210,000 estimate.
The CPI report comes with Federal Reserve officials contemplating their next policy moves.
Minutes from the Fed’s September meeting, released Wednesday, reflected divisions within the rate-setting Federal Open Market Committee. The meeting concluded with the committee opting not to raise interest rates, but the summary showed lingering concern about inflation and worries that upside risks remain.
Since then, however, Treasury yields have jumped, at one point hitting 16-year highs.
Multiple Fed officials have said that the increases could negate the need for further policy tightening, and markets now are pricing only a small chance that the central bank votes to hike before the end of the year. Market pricing further indicates that the Fed will shave about 0.75 percentage point off its key borrowing rate before the end of 2024.
Recent days, though, have brought mixed news on where inflation is heading.
The Labor Department said Thursday that prices at the wholesale level increased 0.5% in September, pushing the 12-month rate to 2.2%, the highest since April and above the Fed’s goal of 2% inflation.
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