Article Summary
September CPI increased 3.7% year over year, up from 3.4% in August, led by energy and gasoline. Economists said hotter inflation could raise the odds of an October Fed hike and keep mortgage rates elevated. AI Summary
Inflation heated up in September, as the Bureau of Labor Statistics’s Consumer Price Index jumped 3.7% on an annual basis in September, up from an annual jump of 3.4% in August.
This increase came as the energy index rose 20.4% annually in September as the gasoline index jumped 34.2% annually. Meanwhile the food index was up 2.5% year-over-year in September.
Other indexes with notable increases over the past 12 months include airline fares (+22.4%), recreation (+2.8%), medical care (+1.5%) and education (+3.8%).
Core inflation, otherwise known as the all items less food and energy index, rose 2.6% annually, up from a 2.4% jump in August.
Month-over-month, the all items index rose 0.6% in September, up from a 0.4% monthly jump in August.
This comes as the gasoline index was up 9.1% month-over-month, accounting for over half of the all items monthly jump. Overall, the energy index was up 5.2% from a month prior, up significantly from a 2.1% monthly increase in August. The index for food remained unchanged from a month prior.
Core inflation posted a 0.3% increase in September, the same as in August. Indexes that rose on a monthly basis in September included recreation (0.5%), used cars and trucks (0.7%), education (0.6%), airline fares (1.2%) and apparel (0.3%), while the index for communication fell 0.2%% from a month prior.
The index for shelter also rose on a monthly basis, jumping 0.4% month-over-month, up from a 0.3% jump in August. On an annual basis, the shelter index was up 3.2% in September.
Economists believe September’s rising inflation could be bad news for home buyers.
“For prospective home buyers, the hotter-than-expected reading raises the likelihood of another Federal Reserve rate hike in October, potentially delaying much-needed mortgage-rate and affordability relief,” Sam Williamson, First American’s senior economist, said in a statement. “Before the report, markets largely expected the central bank to wait until December for its next rate hike, following its first increase in three years last month. With both headline and core inflation exceeding forecasts, policymakers may instead move that hike forward to October. Another hike in December also remains possible, though the Fed’s next move will depend on incoming economic data.”
Williamson said this would keep mortgage rates elevated for longer due to investors having to adjust for more persistent inflation. He also believes it may exacerbate the rate lock-in effect, impacting housing inventory.
“Rising incomes and cooling house prices are helping buyers gradually regain purchasing power, but high borrowing costs continue to erode some of those gains,” he added.
