WASHINGTON – Higher energy costs fueled U.S. consumer prices in September, but overall inflation remained in check as it has for the past several years.
The Labor Department said Tuesday that consumer prices increased 0.3 per cent last month. Much of that rise stemmed from energy, housing and prescription drugs. Energy costs surged 2.9 per cent in September as oil and gasoline prices rebounded from recent lows. Previous price declines still mean that gas costs 6.4 per cent less than a year ago.
Inflation has stayed relatively low despite job growth that has brought more workers into the economy. Until last month, the modest levels of inflation largely came from muted oil prices and a stronger dollar.
With inflation a minimal risk, the Federal Reserve has held down short-term interest rates in hopes of spurring more borrowing and spending to boost economic growth. The markets anticipate that the Fed will keep rates steady at its November meeting and then hike rates at its upcoming meeting in December, which would be the second increase in a year.
“Nothing here to push the Fed to spring into action,” Jennifer Lee, a senior economist at BMO Capital Markets, said about the inflation report.
But the low levels of inflation have also limited incomes for older Americans who receive Social Security. Their annual increase in payments will be 0.3 per cent after being unchanged for this year.
Core inflation, which excludes the volatile categories of food and energy, rose 0.1 per cent.
Prices fell last month for cars and clothing. But they increased 0.4 per cent for shelter costs, which make up roughly a third of the consumer price index.
Over the past 12 months, core inflation has increased 2.2 per cent. But the entire consumer price index has risen at a gradual yearly pace of 1.5 per cent, undershooting the Federal Reserve’s 2 per cent target for inflation.