The pace of US consumer price growth is expected to have levelled off in September around a 13-year high, as inflationary pressures continue to ease in sectors tied most directly to the pandemic reopening, but bubble up elsewhere.
According to a consensus forecast compiled by Bloomberg, the consumer price index (CPI) published by the Bureau of Labor Statistics on Wednesday is expected to have risen 5.3 per cent in September from a year ago, in line with the annual increase reported for August.
On a monthly basis, price gains of 0.3 per cent are pencilled in, the same as the previous period.
Stripping out volatile items such as food and energy, however, “core” CPI is expected to have ticked up 0.2 per cent from August. That compares to the previous month-on-month increase of 0.1 per cent, and maintains an annual pace of 4 per cent.
Economists and policymakers have debated at length the extent to which ongoing consumer price increases will shift to more persistent inflation that broadens out beyond sectors such as used cars and travel-related expenses. These sectors are most sensitive to pandemic-related disruptions and have so far driven the bulk of the gains.
The pace of that growth cooled off substantially in August, but pricing pressures are beginning to broaden out — a dynamic that Raphael Bostic, president of the Atlanta branch of the Federal Reserve, and other officials have noted.
While Jay Powell, Fed chair, has long stood by his view that inflationary pressures will subside over time, he acknowledged last month that the severity of the supply-chain bottlenecks that have exacerbated ongoing price pressures caught the US central bank by surprise. He also admitted that they appear to be getting worse.
His warnings were echoed by Gita Gopinath, chief economist at the IMF, who told the Financial Times this week that central banks needed to be “very, very vigilant” when it came to inflation risks.
The latest data come on the cusp of a policy pivot from the Fed, which is gearing up for a reduction or “taper” of its $120bn asset purchase programme.
Bostic told the FT on Tuesday that the process should begin next month and wrap up entirely by next year in order to give the Fed space to raise interest rates if necessary.
Richard Clarida, Fed vice-chair, also signalled his support for that taper timeline at an event on Tuesday, but reiterated that the move to wind down the stimulus had little bearing on when interest rates may rise.
An increasing number of officials now see an adjustment as early as next year, with at least three rate increases pencilled in before the end of 2023.