Inflation appears to be entrenched and new data reveals it is remaining higher than experts had anticipated.
- The Bureau of Labor Statistics has released a Consumer Price Index report for the month of September.
- Yearly overall inflation hit 8.2% in September, a slight improvement from 8.3% in August.
- Consumer prices took an even larger hit than the previous month though.
- “The Consumer Price Index (CPI) for All Urban Consumers rose 0.4% in September on a seasonally adjusted basis after rising 0.1% in August,” says the Labor Bureau.
- The Fed will likely respond with another large interest rate hike.
- “Nearly all Fed officials expect to raise their benchmark interest rate to between 4% and 4.5% by the end of this year,” says The Wall Street Journal.
- Numbers are still down from the peak 9.1% inflation rate in June, but some global analysts are fearing double-digit inflation numbers in 2023. Some areas of the United States already have over 13% inflation.
Why it’s important
The continued inflation raises fears not only that the current inflation rate is not going to stop but that it is going to become entrenched and take years to overcome.
“U.S. consumer inflation excluding energy and food accelerated to a new four-decade high in September as prices continued to surge, a sign that persistent cost increases are becoming entrenched in the economy,” says The Wall Street Journal.
As we previously reported, the Federal Reserve raised interest rates on September 21 by 75 basis points for the third consecutive time in 2022, sending markets reeling. The Fed has promised to continue hiking interest rates until the current wave of inflation crests, but it doesn’t appear to be stopping.
Backing up a bit
Similar news to today’s report in September caused both the S&P 500 and the Dow Jones Industrial Average to take a 4% plunge.
Inflation harms the entire economy including travel and living expenses. Labor negotiations are even affected. It hits hardest the most economically vulnerable.
About 73% of CFOs told a recent Deloitte study that they’re more concerned about inflation than recession fears.
“The Social Security Administration separately announced Thursday that Social Security benefits would increase by 8.7% in 2023. The boost, calculated from the September CPI, is the highest in four decades,” says The Wall Street Journal.