September CPI shows inflation relief is still far away

by ian

Ian Patrick, FISM News

 

The latest consumer price index (CPI) data seems to show that inflation has not receded, despite the federal government’s attempts to curb the worrying increase in prices through the so-called Inflation Reduction Act.

According to numbers released by the U.S. Bureau of Labor Statistics, the CPI increased by 0.4% in September when compared to August. Economists polled by The Wall Street Journal had predicted only a 0.3% increase for the month.

Although the year-to-year rate of inflation slipped one-tenth of a percentage point, it still remained high for September 2022 at 8.2%.

Financial Issues host Shana Burt commented on the CPI data during Thursday’s show signaling that inflation won’t be going away anytime soon.

“Month-over-month, has inflation peaked? Well, maybe. But is it coming down? No, it’s not,” Burt said.

Two of the subjects which have often contributed most to rising inflation — food and energy — saw opposite reactions for the month-to-month increases. Food rose 0.8% while energy decreased by 2.1%.

But the year-to-year measures show just how much inflation has impacted two of the most critical consumer items. Food has risen by 11.2% while energy has risen a whopping 19.8% since September 2021.

However, what may be considered the most worrisome data is shown in the core CPI, which accounts for all measures of inflation minus food and energy. For the month of September, the core CPI rose by 0.6% on a month-to-month basis. On a year-to-year basis, this index has risen 6.6% — marking the biggest increase since August 1982.

The increase in this inflation rate from August to September was driven mainly by price increases for new vehicles (0.7%), shelter (0.7%), medical care services (1.0%), and transportation services (1.9%).

Year-over-year inflation rates in the core CPI for September 2022 have seen the biggest increases in prices for new vehicles (9.4%), used cars and trucks (7.2%), and transportation services (14.6%).

This core CPI rate does not impact “consumers as much, but is the one that the Fed looks at,” Burt said on her Thursday program.

The Federal Reserve has been steadily increasing the federal funds rate this year as a means to tamp down on the sweltering inflation. The new CPI report will likely give them even more reason to keep increasing that measure.

Seema Shah, chief global strategist at Principal Asset Management, told MarketWatch that “there can’t be anyone left in the market who believes the Fed can raise rates by anything less than 75 basis points at the November meeting.”

Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Reuters that this CPI data “is not what the Fed wants to see six months into one of the most aggressive tightening cycles in decades.”

U.S. Treasury Secretary Janet Yellen also commented on the data, saying that “while there have been favorable indicators on easing of supply chain bottlenecks and softening of labor market pressures, we need to see sustained progress and bringing down inflation remains the president’s number one economic priority.”

Biden reacted to the CPI numbers through a statement issued by the White House on Thursday, claiming that the data shows “some progress in the fight against higher prices,” while adding, “we have more work to do.”

He then segued the poor report into an opportunity to praise his Inflation Reduction Act while simultaneously calling out Republicans. Despite numerous polls showing that the country largely trusts Republicans more with the economy and dealing with inflation, Biden said that if they were to take control of Congress at midterms it would further exacerbate the current financial crisis:

The Inflation Reduction Act locks in lower health care premiums for 13 million people, lowers seniors’ prescription drug prices, and caps their out of pocket expenses for prescription drugs at the pharmacy at $2,000 per year. The Inflation Reduction Act will also lower families’ energy costs in the months ahead. Republicans in Congress’ number one priority is repealing the Inflation Reduction Act. That’s the exact wrong thing to do in this moment. If Republicans take control of Congress, everyday costs will go up – not down.

A recent report from FISM News suggested that the Inflation Reduction Act would cost American taxpayers about $500 billion in the long run.

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