September 2017 Consumer Price Index

Price gains accelerated in September 2017 according to headline figures from the Bureau of Labor Statistics’ Consumer Price Index (CPI). Versus a month earlier, prices rose 0.5 percent, and this jump follows an increase of 0.4 percent in August. Compared to a year earlier, CPI is 2.2 percent higher, speeding up from 1.9 percent in the middle of the third quarter.

Gasoline led this inflation gauge higher, while food (the other volatile component) was rather tame. After surging 6.1 percent in August, petrol exploded in September, increasing 13.1 percent; compared to a year earlier, it is 19.3 percent higher. Costs for human fuel (food) increased 0.1 percent, matching the uptick from the prior period.

Core-CPI, which excludes food and energy, remained relatively steady as the third quarter came to a close. After rising 0.2 percent in August, it managed an increase of just 0.1 percent. Including this monthly deceleration, the year-over-year change for core-CPI now stands at 1.7 percent. A drop of 0.8 percent in costs associated with medical care commodities anchored September’s tally. Additionally, new and used car prices fell 0.4 percent and 0.2 percent respectively.

While this is not the Federal Reserve’s preferred price proxy, core-CPI’s slowing year-over-year trend is likely raising some eyebrows in the Eccles building. America’s central bank is charged with two mandates: guiding the economy toward full-employment and maintaining price stability. Our central bank chooses to define price stability as an inflation trend of 2.0 percent, and this target continues to elude them. As Atlas mentioned here and here, old models are not adequately portraying economic reality. The next Federal Open Market Committee meeting that precedes a press-conference is in December, and many believe this will be the next interest rate increase. However, if a decelerating inflation rate continues, marginally tighter monetary policy may not materialize before the end of the year.