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US Inflation Outpaces Forecast, Highest Since 2008

by Karl Schamotta | October 13, 2021

Inflationary pressures heated up in the United States last month, with consumer prices rising more than forecast as food and energy costs climbed. The Bureau of Labor Statistics reported a 0.4-percent seasonally adjusted month-over-month increase in the consumer price index in September. Forecasters had expected a 0.3 percent gain.

Gains were narrowly focused: Food prices rose 0.9 percent, while energy leapt 1.3 percent. Shelter costs also climbed, with rents increasing 0.5 percent in September, while the index for owners’ equivalent rent ground 0.4 percent higher.

Supply chain shortages continued to ease: Apparel prices fell 1.1 percent over the month, and used vehicle costs fell 0.7 percent after declining 1.5 percent in August.

Less-volatile prices moved incrementally: The core inflation index, which excludes food and energy costs, inched 0.2 percent higher for the month – exactly as markets had expected – compared with a 0.1 percent increase in August.

Year-over-year rates are at multi-decade highs: Headline prices are up 5.4 percent – an increase not seen since 2008. The core index remains 4.0 percent higher, matching annualized rates last posted in the mid-nineties.

The dollar remains stable: The greenback slipped 0.1 percent on the release, but has regained its losses.

Treasury yields are up incrementally: Market-implied odds on a rate hike by the end of 2022 – near 90 percent – remain essentially unmoved. Although many central bankers remain convinced that inflation will subside as supply chain issues are resolved over the coming year, doubts are clearly creeping in. In a speech at the Peterson Institute yesterday, Federal Reserve Bank of Atlanta President Raphael Bostic said “‘Transitory’ is a dirty word… It is becoming increasingly clear that the feature of this episode that has animated price pressures – mainly the intense and widespread supply-chain disruptions – will not be brief. By this definition, then, the forces are not transitory.”

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