The U.S. Bureau of Labor Statistics (BLS) has decided to recall a limited number of staff from furlough to complete the crucial September Consumer Price Index (CPI) report. With the September inflation data now due, that picture has changed dramatically. It does so in the worst way possible, by directly affecting the annual Social Security cost-of-living adjustment (COLA). The CPI report was initially scheduled to be released on October 15. The current government shutdown is now poised to push it back, at least four months.
Inflation is often reported in terms of YoY percentage change, as well as MoM change. These data are essential for understanding long-term economic trends and evaluating the impacts of policy decisions. The BLS plays a vital role in releasing this data, ensuring that stakeholders have access to accurate and timely information regarding inflation rates.
Importance of the CPI Report
That’s why the September CPI report is so monumental. It provides important information for determining the yearly COLA, which is based on the third-quarter CPI numbers. This change benefits retirees by ensuring millions of current and future Social Security beneficiaries can better maintain their standard of living amidst accelerating cost-of-living increases.
“The decision reflects the importance of September inflation data in determining the annual Social Security cost-of-living adjustment (COLA), which is calculated using third-quarter CPI figures. A prolonged delay would risk postponing the COLA announcement that affects millions of retirees,” – New York Times, citing a Trump administration official.
This CPI report is a big deal for Social Security. All the while it serves as a crucial barometer of our wider economic wellbeing. Policymakers and economists obsessively track these figures to get a sense of inflationary pressures in the economy.
Core Inflation and Its Implications
Core inflation, which excludes volatile items such as food and energy, is targeted by central banks as a measure of price stability. Normally, the target for central banks is 2% core inflation. The BLS continues to report these core inflation figures, in the same MoM and YoY formats that we see for headline inflation.
When core CPI is above the 2% target, central banks usually punish this by increasing interest rates. They’re doing this in an attempt to fight inflation and bring stability to our economy. On the flip-side, deep core CPI dropping underneath this threshold could trigger central banks to raise rates to cool down an overheated economy.
The decision to call back staff underscores the political urgency of finalizing the CPI report. As such, any shutdown could have a dramatic effect on economic policy and everyday Americans’ lives.
Risks of Delayed Data Release
A major hold up in the release of this month’s CPI report threatens to complicate the usually timely release of COLA adjustments. This lack of clarity complicates life for all economic actors. Considering the ramifications, BLS’s attempts to speed the completion of this report along are commendable.
Inflation data has more widespread impacts. Investors, businesses, and policymakers all depend on timely inflation reports to make smart, informed decisions. Delays can cause miscalculations in budgeting and spending plans, adding further complication to the economic landscape.