Rising prices for food and shelter contributed more than half of this increase, while prices for new cars, household furnishings and car insurance also climbed. The index that tracks new car prices rose 8.7% over the 12 months ending in September, which marks the biggest jump since 1980.
The increase in shelter costs, which includes rents and rent-equivalents for home owners, is worrying, said economist Sung Won Sohn.
“Shelter costs rose little last year, but keeps marching upward,” he wrote in a note. “The government gradually phases in rent increases over time. It is about to become a major source of inflation in the coming months.”
More expensive food and cheaper plane tickets
Food prices jumped 0.9% in September, far more than in August, as grocery store prices climbed across the board.
But not everything in America got more expensive. Plane tickets, for example, keep getting cheaper: The price index for airline fares dropped 6.4% in September, after a 9.1% decrease in August.
Energy prices rose 1.3% last month, the fourth straight increase. Gas prices rose 1.2%, less than in the prior month. Over the past 12 months, the energy price index rose nearly 24.8% and gas increased 42.1%.
With more volatility in the energy market this month, and US oil prices rising above $80 for the first time in nearly seven years earlier this week, energy prices could contribute more to inflation in October.
What does this mean for the Fed?
Inflation has been running above the Federal Reserve’s target of around 2% for what feels like a long time now. Even so, the central bank has been steadfast in its view that the price spikes that have become a hallmark of the pandemic economy will only be temporary.
So is the Fed just plain wrong in its assessment?
It’s still a little early to tell. Even though American workers have been feeling the pandemic price pressure for some time, it hasn’t been long enough for the policy makers at the Fed to really sound the alarm.