US egg prices have increased by more than 30% in the last year
US consumer prices rose more-than-expected last month, a sign that the inflation struggle in the world’s largest economy is far from over.
Inflation, the rate at which prices are rising, was 8.2% in the 12 months to September, compared to 8.3% in August.
Despite the decline, the number was still higher than forecast.
Inflation in the US is being watched closely as the Federal Reserve’s efforts to tame the problem is driving up the dollar and the cost of borrowing around the world.
The interest rate is well above the central bank’s 2% target, meaning the Federal Reserve is likely to keep raising interest rates to cool soaring prices.
Stock markets fell sharply after the report, disappointing investors previously cheered by other signs, including a drop in shipping costs, that suggested the problem might be easing.
“The Fed needs to respond at the next meeting and continue to keep policy tight until there are signs inflation is under control,” said Neil Birrell, chief investment officer at Premier Miton Investors.
“These pressures are increasing uncertainty and are bad news for the economy at large, but for consumers in particular. The top of interest rates will in all likelihood be higher now markets.”
US inflation has eased since hitting 9.1% in June, helped by a fall in fuel prices at the pump.
The cost of clothing and used cars also fell last month.
But the problem continues to affect other parts of the economy. Food prices have risen by 13% in the last 12 months, and housing and medical costs are also rising sharply.
Excluding food and energy, inflation rose 6.6% – the fastest rate since 1982.
“The composition of the inflation data is perhaps even more concerning than the total number,” said Seema Shah, Principal Asset Management’s chief global strategist.
“Increases in housing and medical indices … confirm that price pressures are extremely persistent and will not abate without a Fed fight.”
The Federal Reserve has hiked interest rates five times since March and has opted for unusually large hikes in recent months, which have unsettled financial markets and caused a sharp slowdown in sectors such as housing.
By making borrowing more expensive, the Fed hopes to reduce demand, especially for large items like cars and houses, and ease the pressures that are pushing up prices.
But by slowing activity, the Fed also risks plunging the economy into recession. Analysts believe that outcome is increasingly likely as inflation has so far stubbornly resisted the Fed’s efforts.
With midterm elections approaching in November, President Joe Bien has tried to argue that the slowdown in economic activity is a healthy departure from the post-pandemic surge in growth, pointing to robust job creation and low unemployment.
“I don’t think there will be a recession. If it does, it’s going to be a very mild recession,” he said in an interview this week.
But worries about the economy have weighed on the Democrats.
“Americans are being pressured by the cost of living: It’s been that way for years, and they didn’t need today’s report to tell them that. That’s one of the main reasons I ran for president,” he said after Thursday’s inflation report.
“Today’s report shows some progress in the fight against higher prices, although we still have more work to do.”
“Christmas won’t be that big this year”
‘Christmas is not going to be as big this year’
According to Brooke Riske, the prices of everything from groceries to dance costumes are rising On the same subject : Why shoulder season is the next big travel trend.
Brooke Riske’s family began planning to build a new home in Virginia more than a year ago – only to find soaring material costs and a sudden increase in borrowing costs are forcing them to pull out.
“We had to put the brakes on this project,” says the 36-year-old mother of two. “We’re still building a house, but we have to build a house that’s smaller than we wanted and take out a mortgage that’s bigger than we wanted.”
The rising cost of living is having an impact in other ways as well, with everything from grocery bills to her daughter’s dance costumes soaring. Brooke, who works in education, says her pay has stayed the same.
“Christmas isn’t going to be that big this year because our money doesn’t stretch that far and we’re trying to be smart with all the unknowns,” she says, “I just feel insecure about the next few years. Will we enter a serious recession?”
Many analysts said they expect another rate hike at the next Fed meeting but hope the pace will slow thereafter.
But until the trends are clear, they expect the Fed to keep raising rates despite growing concerns about how the Fed’s rate hikes, which tend to divert money to the US and boost the dollar, will affect the rest of the world . where many countries are wrestling with their own inflationary problems.
US Treasury Secretary Janet Yellen, a former Fed chief, acknowledged the concern in a speech on Wednesday, saying the US is “alert” about the global situation but domestic concerns are guiding policy.
“Our way forward begins with the chores we need to do at home,” she said. “In the United States, our number one economic priority is to bring inflation down while maintaining a strong job market.”
