With food prices continuing their ascent and core inflation becoming more consistent, Americans are right to treat the rising price level as a top concern.
The September consumer-price index report from the Bureau of Labor Statistics is out today, and it shows inflation at 8.2 percent year-over-year and 0.4 percent month-over-month. That’s a year-over-year decline since August’s 8.3 percent, but a month-over-month increase from August’s 0.1 percent.
The consensus projections were 8.1 percent year-over-year and 0.2 percent month-over-month.
The index for all items less food and energy, or core inflation for short, showed a 0.6 percent month-over-month increase, which was the same as August. It’s up 6.6 percent year-over-year.
The food index continues to soar, up 0.8 percent month-over-month, which is the same as it was in August. The food index is 11.2 percent higher than it was a year ago. Food at home is up 13 percent year-over-year.
Gasoline prices weigh significantly in the CPI. The September report registered a 4.9 percent decline in gasoline prices. That’s pulling overall inflation down for September, and it likely won’t be there for the October report. According to the Energy Information Administration, gasoline prices are up by 20 cents on average since the last week of September. With OPEC’s decision to reduce petroleum production and the war in Ukraine still ongoing, energy-market pressures will remain, and gasoline prices are unlikely to decline quickly.
With core inflation continuing unabated and unemployment declining last month, the Federal Reserve will likely be even more firmly committed to its plans for interest-rate increases. The trade-off in monetary policy-makers’ minds is between inflation and unemployment. Effectively lowering inflation should increase unemployment, the theory goes, so the response from the labor market would temper the interest-rate increases. With the unemployment rate still at a very low level, that check on the Fed’s actions is not a current constraint.
With this month’s reading, the Social Security cost-of-living adjustment will be 8.7 percent next year. Social Security budgeting and projections are based on much lower baseline inflation, and the high cost-of-living adjustment, while good for seniors, will only put the program closer to insolvency.
President Biden’s claim to “zero inflation” for the July inflation report, which showed month-over-month inflation at 0.0 percent, is looking increasingly short-sighted. With food prices continuing their ascent and core inflation becoming more consistent, the American people are right to treat the rising price level as their top economic and political concern.