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Inflation figures are easing again, as the CPI report for September shows

Inflation figures are easing again, as the CPI report for September shows

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Inflation hit a new three-year low in September as a further decline in gasoline prices offset a rise in the cost of used cars and auto insurance. But price increases slowed less than expected and a measure of underlying price increases increased.

According to the Labor Department’s Consumer Price Index, a comprehensive measure of the cost of goods and services, overall consumer prices rose 2.4% from a year earlier, compared with 2.5% in August. That’s the smallest increase since February 2021 and the sixth straight decline, putting inflation slightly above the Fed’s 2 percent target. However, economists polled by Bloomberg expected it to fall to 2.3%.

On a monthly basis, costs increased slightly by 0.2%, which is in line with the previous month.

The latest decline is likely to keep the Federal Reserve on track to cut interest rates by a more dovish quarter of a percentage point next month, after its first half-percentage point cut in September boosted the stock market.

What is the core inflation rate today?

Core inflation, which excludes volatile food and energy items and is closely watched by the Fed, rose 0.3%, similar to August. As a result, annual core inflation rose to 3.3% from 3.2% in the previous month. Forecasters expected the core metrics to remain stable.

Food and energy prices are often more volatile because they respond to the sharp price fluctuations of global commodities such as oil and wheat. The Fed prefers to focus on more sustainable price changes that reflect consumer and business demand and can be influenced by interest rates.

What is the Fed interest rate today?

After cutting the key interest rate by half a percentage point in September, Fed officials signaled they are likely to cut them by a quarter point at their final two meetings this year as long as inflation continues to ease. That would reduce the rate from about 4.8% to about 4.3%.

With inflation seemingly heading toward the Fed’s 2 percent target, it would likely take an unusually weak or strong labor market to change officials’ plan for quarter-point rate cuts, Bank of America wrote in a note to clients . U.S. employers unexpectedly added 254,000 jobs in September, easing fears of a sharp slowdown in job growth and a possible recession.

Thursday’s slightly hotter-than-expected inflation report likely keeps the Fed on track to cut interest rates by a quarter of a percentage point next month, some economists said, but virtually rules out another half-percentage point cut. And if job growth picks up in October, the Fed may have to consider a pause, some forecasters suggested.

“This is not what the Fed wanted to see after its bold move in September and virtually rules out another big rate cut in November,” economist Sal Guatieri of BMO Economics wrote in a note to clients. “While we’re still leaning toward a quarter-point cut, a lot will depend on whether we see a good jobs report in October for the second day in a row.”

From March 2022 to July 2023, the Fed raised its short-term interest rate from near zero to a 23-year high of 5% to 5.25% to help contain inflation.

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Why are gasoline prices falling in the US?

Gasoline prices fell 4.1% in September and were down or flat four times in the past five months, as global growth slowed and record U.S. oil production curbed crude prices. Regular unleaded fuel averaged $3.20 a gallon Wednesday, down from $3.27 last month and $3.70 a year ago.

Are rents falling in the USA?

Rents rose 0.3% in September after rising 0.4% the previous month. As a result, the annual increase fell from 5% to 4.8%, the lowest level since April 2022. Lower rents for new rentals are finally having an impact on the prices for existing tenants.

That’s good news because housing costs have been largely the biggest factor in inflation, accounting for 36% of price increases last month.

Some other service costs also rose, contributing to the rise in core inflation. Car insurance premiums rose 1.2% and are up 16.3% over the past year. Auto repair costs increased 1%. Medical care services increased by 0.7%. And airfares rose 3.2% after rising 3.9% the previous month. Hard hotel prices fell by 1.9%.

Meanwhile, some goods prices that had been falling rose last month. Used car prices rose 0.3%; Clothing: 1.1%; and furniture: 1.7%.

Are food prices expected to fall?

Food prices rose 0.4% after a series of flat or small price increases.

Last month, the cost of eggs rose 8.4% due to a two-year bird flu outbreak. The cost of bacon increased 1.6%, uncooked ground beef increased 0.4% and chicken increased 0.2%.

The more expensive proteins were slightly offset by a 0.4% price decrease for breakfast cereals and a 0.2% decrease for bread.

Meanwhile, restaurant prices continued to rise due to higher labor costs, rising 0.3% for the second straight month.

(This story has been updated to add new information.)