Inflation reached its highest level since the start of the year in September, according to data released Friday by the U.S. Bureau of Labor Statistics (BLS).
The delayed report showed that overall inflation rose to an annual rate of 3.0% in September, the third consecutive month of higher inflation and the highest rate of inflation since January of this year. Compared to a month prior, the index rose 0.3% at a seasonally adjusted pace, down from a 0.4% monthly increase in August.
The all items less food and energy index also rose 3.0% during the 12-month period ending in September. On their own, energy and food rose 2.8% and 3.1% over the past year, respectively.
Month-over-month, the index for gasoline posted the largest increase in September, rising 4.1%. The BLS said this increase was the largest factor driving the monthly jump in the all items index.
On a monthly basis, the all items less food and energy index rose 0.2% in September.
The index for shelter posted a sizable increase, rising 3.6% compared to the year prior. Over the past year, the rent index has risen 3.5%, while the index for owners’ equivalent rent jumped 3.8% annually.
In comparison to a month ago, the shelter index was up just 0.2%, down from a 0.4% monthly gain in August. Within the overall shelter index, the index for owners’ equivalent rent rose 0.1% in September, the smallest 1-month increase in that index since January 2021. Meanwhile, the rent index rose 0.2% over the course of September.
Bright MLS chief economist Lisa Strutevant noted that this report comes at a particularly important time, as the Federal Reserve is preparing to meet next week to contemplate another interest rate cut without the aid of the September employment report, weekly jobless claims data and retail sales reports.
“Despite the uptick in inflation last month, it is still very likely that the Fed will cut interest rates by a quarter of a percentage point next week,” she said in a statement. “The labor market has been cooling, and without additional data indicating the contrary, there is little reason for the Fed to pull back on the widely anticipated rate cut.”
In contrast to Sturtevant, Sam Williamson, a senior economist at First American, still believes the Fed will cut rates.
“Despite the uptick, the Fed is still expected to prioritize addressing growing signs of labor market softness over further progress against inflation and cut rates at its meeting next week,” Williamson said in a statement. “However, officials remain divided on how aggressively to ease, making a December cut far from certain and dependent on incoming data.”
One thing the two economists can agree on, however, is that softer mortgage rates this fall have helped improve affordability.
“Lower rates help affordability and can bring some buyers into the market this fall,” Sturtevant said. “However, as prices of gas, food and other household expenses continue to rise, prospective buyers are still going to be cautious.”
