Inflation Remains Stable as Price Pressures Ease

Inflation remained steady in September, indicating that the Federal Reserve’s efforts to control price pressures are gradually paying off, despite the robustness of the labor market.

According to the Labor Department, prices climbed at a rate of 0.4% in September compared to the previous month, and showed a year-on-year increase of 3.7%. Although this demonstrates a slight deceleration from August’s 0.6% growth, which was largely driven by higher energy costs, the 12-month rate remained consistent with the previous month.

When excluding volatile food and energy items, known as core prices, there was a 0.3% increase in September, mirroring the growth observed in the prior month. These relatively moderate readings have persisted throughout the summer months. On an annual basis, core prices rose by 4.1% in September, down slightly from August’s 4.3% increase.

The sustained slower growth in core prices, along with a moderation in wage gains and an upsurge in bond yields, may lead Federal Reserve policymakers to conclude that further interest rate hikes are unnecessary this year. If so, it signals that the recent string of rate increases has likely reached its peak after pushing the benchmark federal-funds rate to its highest level in 22 years.