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WASHINGTON (AP) – U.S. inflation fell last month to its lowest level since it first started rising more than three years ago, a flurry of encouraging economic news in the final weeks of the presidential election.
Consumer prices rose just 2.4% in September compared to the same month last year, down from the 2.5% rise in August and the lowest annual rate of increase since February 2021. Measured monthly, prices rose 0.2% from August to September, the Labor Department said Thursday. Same as last month.
But “core” prices, a measure of underlying inflation that excludes volatile food and energy costs, remained elevated in September due to increases in health care, clothing, car insurance and airfares. Core prices in September rose 3.3% from the previous year and 0.3% from August. Economists closely monitor core prices, which are usually a better indicator of future inflation.
Overall, September’s data shows that inflation is steadily returning to the Fed’s 2% target, albeit in a slow and uneven pattern. Apartment rent growth slowed last month, a sign that housing inflation is finally calming down, a long-awaited development that should bring relief to many consumers.
Overall inflation last month was subdued by a sharp drop in gasoline prices, which fell 4.1% from August to September. Food prices rose 0.4% last month, after the first moderate rise in about a year, but they rose only 1.3% compared to the same month last year.
Restaurant food prices rose 0.3% last month and 3.9% over the past year. Additionally, clothing prices increased by 1.1% from August to September, and by 1.8% compared to the previous year.
The improvement in inflation conditions follows a mostly healthy jobs report released last week, which showed hiring accelerated in September and the unemployment rate fell from 4.2% to 4.1%. The government also reported that the economy expanded at a solid 3% annual rate in the April-June period. Growth is likely to have continued at roughly the same pace in the just-completed July-September quarter.
Lower inflation, strong employment and healthy growth as measured by polls could undermine former President Donald Trump’s economic advantage in the presidential race. In some polls, Vice President Kamala Harris is tied with President Trump on the question of who will best handle the economy, after Trump took a firm lead over President Joe Biden on the issue.
At the same time, most voters still rate the economy relatively poorly, citing cumulative price increases over the past three years.
For the Fed, the much better-than-expected jobs report released last week heightened some concerns that the economy was not cooling enough to slow inflation. Last month, the central bank slashed its key policy interest rate by 0.5 percentage points, the largest rate cut in four years. Fed policymakers also signaled they expect two more quarter-point rate cuts in November and December.
Numerous Fed officials have said in comments this week that they intend to continue cutting key interest rates, but at a deliberate pace, suggesting that further cuts of half a percentage point are unlikely.
Laurie Logan, president of the Federal Reserve’s Dallas branch, said in a speech Wednesday that the Fed “shouldn’t rush to lower its benchmark interest rate, but rather do so in stages.”
Inflation has soared in the United States, Europe and many countries in Latin America amid economic recovery from the pandemic as the coronavirus shuts down factories and chokes supply chains. Russia’s invasion of Ukraine worsened energy and food shortages and increased inflation. In the US, it peaked at 9.1% in June 2022.
Economists at Goldman Sachs earlier this week expected core inflation to fall to 3% by December 2024. And unless conflicts in the Middle East worsen dramatically, few analysts expect inflation to rise again.
Rising prices have made the economy worse for many Americans, but wages and incomes are now rising faster than costs, which should make it easier for households to adapt. Last month, the Census Bureau estimated that inflation-adjusted median household income (the level at which half of households are above and half are below) will rise 4% in 2023, enough to return incomes to pre-pandemic peaks. Reported.
Rising food prices are causing many consumers to shift their spending from name brands to private labels or to shop more at discount stores. These changes are putting more pressure on processed food companies to slow price increases, for example.
PepsiCo this week reported a drop in sales after imposing steep price increases on drinks and snacks.
