Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Sign up for a free issue of The Kiplinger Letter or for more information.
Consumer prices increased by 0.4% on a monthly basis in September — a little higher than expected — and 3.7% from a year ago, but that is still consistent with a slow downtrend in core inflation.
Excluding food and energy, prices rose a moderate 0.3%, and 4.1% over the past 12 months, down from 4.3% last month. The main thing preventing a more rapid slowdown in inflation is large increases in shelter costs, the largest single component of the consumer price index. These rose 0.6% in September and 7.2% over the past year. However, we expect these cost pressures to ease over the next six months.
Energy prices have been volatile: They rose 1.5% in September. Gasoline was up 2.3%, but natural gas was down 1.9%. However, energy is not likely to add to the price index in the next couple of months. The price of groceries rose a modest 0.1%, and only 2.0% over the past year, but restaurant prices increased 0.4% and a large 6.0% in the past 12 months. There was some good news for consumers: Clothing prices declined 0.8% in September, used-car prices dropped 2.5%, and ahead of the holiday shopping season, toys are 3.6% cheaper than they were last year, at this time.
Inflation pressures will stay roughly the same this fall, yet the headline number will jump in December.
Headline numbers are calculated as the percentage change from a year ago, and December year-ago prices declined or rose only modestly. This will create a temporary spike in the headline CPI figure, with reported inflation likely to come in at about 4.3%. The headline number will drop in January and February, however.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Moderate inflation pressures should enable the Fed to stop hiking short-term interest rates.
Concerns about the effect of higher interest rates on banks’ portfolios of government securities will be the main reason for the pause, but recent inflation reports will make the central bank’s decision easier. The Fed is likely to discount the pickup in inflation headline numbers this fall, as well.
The Fed is unlikely to actually cut rates this year, however.
It remains concerned about persistent inflation in the services sector, which will likely keep it from reversing recent hikes unless a recession hits. The Fed would like to see wage increases start to soften in order to prevent a cycle of further price increases, in which businesses try to maintain their profit margins by passing higher wage costs along to customers.
Related content
-
-
Work Email Phishing Scams on the Rise: The Kiplinger Letter
The Kiplinger Letter Phishing scam emails continue to plague companies despite utilizing powerful email security tools.
-
Legal Trouble for Senator Bob Menendez May Hurt Dems: The Kiplinger Letter
The Kiplinger Letter Menendez stepped down as chairman of the Senate Foreign Relations Committee but contends he will run for reelection in 2024.
-
Work Email Phishing Scams on the Rise: The Kiplinger Letter
The Kiplinger Letter Phishing scam emails continue to plague companies despite utilizing powerful email security tools.
-
Tech Giants Look to Curb AI's Energy Demands: The Kiplinger Letter
The Kiplinger Letter The expansion in AI is pushing tech giants to explore new ways to reduce energy use, while also providing energy transparency.
-
New Employment Guidance Proposed on Hostile Work Practices: The Kiplinger Letter
The Kiplinger Letter New guidelines for employers fueled by a sharp increase in employment discrimination lawsuits in 2023.
-
SEC Cracks Down on Misleading Fund Names: The Kiplinger Letter
The Kiplinger Letter The SEC rules aim to crack down on so-called “greenwashing” — misleading or deceptive claims by funds that use ESG factors.
-
As Tensions Rise, U.S. Imports From China Shrink: The Kiplinger Letter
The Kiplinger Letter China now accounts for less than 13.5% of American imports from abroad.
-
Traffic Circles Can Make Intersections Safer, But Also Confusing: The Kiplinger Letter
The Kiplinger Letter In the U.S. traffic circles are on the rise — studies show that roundabouts, as they are commonly known, are safer than traditional intersections.
-
Cargo Thefts on the Rise: The Kiplinger Letter
The Kiplinger Letter Organized crime rings are targeting goods in shipments.
-
100 Years of The Kiplinger Letter: Centenary Special Edition
The Kiplinger Letter On September 29, 1923, the very first Kiplinger Letter was published.
