U.S. CPI rises 0.3% in September, hits 5-month high
U.S. consumer prices recorded their biggest gain in five months in September as the cost of gasoline and rents surged, pointing to a steady pickup of inflation that could keep the Federal Reserve on track to raise interest rates in December.
The Labor Department said on Tuesday its Consumer Price Index increased 0.3 percent last month after rising 0.2 percent in August. In the 12 months through September, the CPI accelerated 1.5 percent, the biggest year-on-year increase since October 2014. The CPI rose 1.1 percent in the year to August.
“The upward creep of prices weakens any argument against a rate increase in December,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. “The economy is close to full employment and prices are starting to respond to that reality.”
Last month’s increase in the CPI was in line with economists’ expectations. However, underlying inflation moderated amid a slowdown in the pace of increases in healthcare costs after recent robust gains.
The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. That slowed the year-on-year increase in the core CPI to 2.2 percent following a 2.3 percent rise in August.
But with rents, which account for a larger share of the core CPI, recording their biggest increase in nearly 10 years, and wages pushing higher, economists cautioned against putting too much emphasis on last month’s weak reading.
The U.S. central bank has a 2 percent inflation target and tracks an inflation measure which is at 1.7 percent. Fed Vice Chair Stanley Fischer said on Monday that the U.S. central bank was “very close” to its inflation and employment targets.
“As inflation approaches 2 percent, the argument that the economy has more room to run becomes harder to make and we believe the Fed remains on track for a rate hike in December,” said John Ryding, chief economist at RDQ Economics in New York.
