The cost of living in the United States went up recently. It rose at the fastest pace in the last five months in the area of prices for energy and for shelter. This is a sign that inflation is reaching the forecast that the Federal Reserve has anticipated. The Fed was looking forward to more inflation for the economy and it looks like it is happening. The consumer-price index saw an increase that matched the median forecast of the economists. This increase in the consumer-price index was anticipated.
Factors Point to an Interest Rate Hike
This Tuesday, the Labor Department came out with facts and figures regarding the state of the economy and cost of living. In September, compared to the previous month, the consumer-price index went up 0.3 percent. For the month of August, it had gained 0.2 percent. The level for this time of the year compared to the same time last year was up 1.5 percent. This is the most that the consumer-price index has gone up since October 2014. Excluding costs that are volatile, for food stuffs and fuel, price rose by 0.1 percent.
Housing costs are on the increase. Also, the recent drop in prices for energy has abated. So, prices in general have shown a pickup. The labor market is still going strong in the United States. These factors combined could lead policy makers to increase interest rates this December. So far this year, policymakers have been putting off any increase. But now could be the time for an increase of a quarter of a point in the interest rate.
Scott Brown is a chief economist at a financial institution, Raymond James Financial Inc. from St. Petersburg, Florida. He says that everything seems to be going according to forecasts.
“This is still consistent with a December rate hike and a gradual pace over the next year.”
Said Scott Brown.
Projections Say Prices Will Increase in the Future
Future projections that are looking at consumer prices anticipate another rise. Across all categories, prices could go up anywhere from 0.2 percent to 0.4 percent.
Officials at the Federal Reserve are taking into consideration whether or not to raise the level of the benchmark interest rate before the end of the year. The Fed has kept the interest rate on hold for the entire year of 2016. But as inflation goes up, policymakers could see this as a reason to go ahead with plans to raise the interest rate. One of the price gauges that officials are looking at is the measure of personal consumption expenditures form the Commerce Department. This key economic indicator has failed to meet the Fed’s goal of 2 percent since April 2012.
The consumer-price index is the broadest out of three different price gauges that the Labor Department uses. The CPI includes all goods and services. Reports from this month regarding the CPI said that wholesale prices went up 0.3 percent in September. This is the first increase in three months. At the same time, the cost for imported goods went up just 0.1 percent for the last month. So inflation pressures coming from abroad did not have an effect.
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