Inflation rises 5.4% from year ago, matching 13-year high
Consumer prices rose 0.4% last month, slightly higher than August’s gain and pushing annual inflation back to the highest increase in 13 years
WASHINGTON — Consumer prices rose 0.4% last month, slightly higher than August’s gain and pushing annual inflation back to the highest increase in 13 years.
The unexpected burst of inflation this year reflects sharply higher prices for food and energy, but also new and used cars, hotel rooms, clothing, and furniture, among other goods and services. COVID-19 has shut down factories in Asia and slowed U.S. port operations, leaving container ships anchored at sea and consumers and businesses paying more for goods that don’t arrive for months.
Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, who are having to pay more to attract employees. Average hourly wages rose 4.6% in September from a year earlier, a healthy increase, but not enough to keep up with inflation.
Gas prices jumped 1.2% last month and have soared more than 42% compared with a year ago. Electricity prices rose 0.8% in September from August.
Supply chain disruptions continue to drive new car prices higher, which rose 1.3% last month and are up 8.7% from a year ago, the largest 12-month increase since 1980. A shortage of semiconductors has restrained vehicle production and left fewer cars on dealer lots.
The rapid price increases have raised pressure on the Federal Reserve, which has pegged its benchmark interest rate at nearly zero to spur more borrowing and spending. Yet inflation is far above its target of 2%. Chair Jerome Powell has repeatedly said that the price gains should “abate” next year, bringing inflation closer to the target.
Fed Vice Chair Richard Clarida echoed that view in remarks Tuesday.
“The unwelcome surge in inflation this year, once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory,” he said.
Raphael Bostic, president of the Atlanta Federal Reserve, joked Tuesday in separate remarks that “transitory” is now seen as the equivalent of a curse word at the Atlanta Fed. Bostic said that the price spikes mostly reflect the pandemic’s impact on supply chains and added they should eventually fade, but it will likely take longer than many Fed officials initially expected.
The White House said Wednesday that it has helped foster an agreement to keep the Port of Los Angeles open 24 hours a day, seven days a week, in an effort to ease supply bottlenecks and reduce price pressures.