The Labor Department reported on Thursday that the pace of price increases over the past year exceeded forecasts made in September, while jobless claims saw an unexpected increase following Hurricane Helene and the Boeing strike.
The consumer price index, which measures the costs of goods and services across the U.S. economy, rose by a seasonally adjusted 0.2% for the month, resulting in an annual inflation rate of 2.4%. Both figures were 0.1 percentage point higher than the Dow Jones consensus. This annual inflation rate was 0.1 percentage point lower than August and the lowest since February 2021.
Excluding food and energy, core prices increased by 0.3% for the month, leading to an annual rate of 3.3%. Both core readings were also 0.1 percentage point above forecasts.
A separate report on Thursday revealed that weekly jobless claims reached a 14-month high, indicating potential weakness in the labor market despite a significant increase in nonfarm payrolls in September. However, much of the surge could be attributed to the hurricane and strike.
The Bureau of Labor Statistics stated that more than three-quarters of the inflation increase came from a 0.4% rise in food prices and a 0.2% increase in shelter costs, offsetting a 1.9% decline in energy prices. Other contributing factors included a 0.3% increase in used vehicle costs, a 0.2% rise in new vehicles, a 0.7% increase in medical care services, and a 1.1% surge in apparel prices.
Following the report, stock market futures declined, while Treasury yields showed mixed movements. The Federal Reserve has started to reduce benchmark interest rates, with expectations for further cuts, although the pace and extent of these reductions remain uncertain.
Federal Reserve officials have expressed increased confidence in inflation easing towards their 2% target, while also showing some concerns about the state of the labor market. The Consumer Price Index (CPI) is not the Fed’s official inflation gauge but is part of the indicators used by policymakers. Traders in futures markets increased their bets on a quarter percentage point rate cut at the Fed’s November policy meeting to about 86%.
Chicago Fed President Austan Goolsbee emphasized the importance of focusing on overall trends rather than day-to-day fluctuations in making monetary policy decisions. Policymakers have noted rising risks in the labor market, with unexpected increases in initial filings for unemployment benefits and continuing claims.
The impact of Hurricane Helene and the Boeing strike on jobless claims was evident, with rising prices in various food categories indicating persistent inflation. Egg prices surged by 8.4%, while butter prices increased by 2.8% for the month. Shelter costs, which have remained higher than expected by Fed officials, rose by 4.9% year over year, suggesting a potential easing of broader price pressures ahead.
