US Markets
Thursday, October 12th, 2023 1:39 pm EDT
Key Points
- In September, consumer prices in the United States increased at a slightly faster-than-expected pace, drawing attention to the issue of inflation for policymakers. The Consumer Price Index (CPI) rose by 0.4% on the month and 3.7% from a year ago, surpassing expectations, with headline inflation having increased by 0.6% in August.
- Shelter costs played a significant role in the inflation increase, with the index for shelter rising by 0.6% for the month and 7.2% from a year ago. Energy costs also rose by 1.5%, and food costs increased by 0.2%. Services prices, which are crucial for predicting long-term inflation trends, saw a 0.6% gain, while vehicle prices had mixed results, with new vehicles up by 0.3% and used vehicles down by 2.5%.
- Despite the inflation report, markets showed only a modest reaction, with stocks edging higher and Treasury yields showing little change. Real average hourly earnings dropped by 0.2% on the month due to the difference between the inflation rate and nominal earnings, affecting worker wages. Federal Reserve officials are considering their next policy moves, with debates over the path of monetary policy in light of concerns about inflation and recent changes in Treasury yields.
In September, consumer prices in the United States increased slightly faster than expected, maintaining a focus on inflation for policymakers. According to a Labor Department report, the consumer price index (CPI) rose by 0.4% on a monthly basis and 3.7% on a year-over-year basis, exceeding Dow Jones estimates of 0.3% and 3.6%, respectively. Headline inflation had risen by 0.6% in August.
When excluding volatile food and energy prices, the core CPI, a more reliable indicator for long-term trends, increased by 0.3% on the month and 4.1% over the past 12 months, in line with expectations. Shelter costs, which make up a significant portion of the CPI, were the main driver of the inflation increase, rising by 0.6% for the month and 7.2% over the year. Energy costs increased by 1.5%, with gasoline prices up by 2.1%, while food costs increased by 0.2% for the third consecutive month. Services prices, which are critical for predicting long-term inflation, also rose by 0.6%, excluding energy services, and by 5.7% over the past 12 months.
While there was a modest market reaction to the CPI report, with stocks edging higher and Treasury yields remaining relatively unchanged, the increase in CPI resulted in a decrease in real worker wages, with real average hourly earnings dropping by 0.2% on the month.
This inflation report comes at a time when Federal Reserve officials are considering their next policy moves. The Fed’s September meeting minutes showed divisions within the Federal Open Market Committee regarding interest rate increases. Despite concerns about inflation and lingering worries about upside risks, the committee decided not to raise interest rates. However, since then, Treasury yields have risen significantly. Some Fed officials have suggested that these increases may eliminate the need for further policy tightening. Consequently, markets are now pricing in only a small chance of a rate hike before the end of the year, with expectations of a reduction in the central bank’s key borrowing rate by the end of 2024. Despite the mixed news on inflation, the wholesale price index also rose in September, further fueling discussions about the path of monetary policy.
For full original article on CNBC, please click here: https://www.cnbc.com/2023/10/12/cpi-september-2023.html
