US inflation falls unexpectedly to 3% for first time since January. This increase reflects the largest annual advance in consumer prices for the year ending September. That’s an increase from the 2.9% that was reported last month. Analysts had been looking for an even larger increase of 3.1%. The real jump ended up being lower than most expected anyway, so it was some good news for surprised policymakers.
Olu Sonola, the head of US economic research for Fitch Ratings, asked in an internal memo what the latest inflation report means. He thinks they’ll deliver “Fed’s Sigh of Relief.” The Federal Reserve has signaled that watching inflation trends will play a major role in its economic strategy. The prevailing data suggests that the tariff pass-through is indeed muted, which likely plays a role in keeping prices stable.
As it turns out, in September, furniture prices jumped to the highest level ever recorded. They were up 3.8% year-over-year and up 0.9% month-to-month just for March. Comparing August to September, prices rose 0.3% on average in all areas. That’s a modest moderation from last month’s 0.4% increase. Rents continued to rise as well, up 3.5% year-on-year, in line with August’s numbers.
The report points out larger price changes for some specific commodities. Online shopping helped curb inflation, too. QoQ beef prices increased more than 14% as of September 2023, with average coffee prices up almost 19%. These differences change the broader narrative about the underlying forces driving inflation in our economy. One thing is clear, they will together shape how consumers will be spending their dollars moving forward.
“As odd as it may seem, the Fed will be happy with inflation staying around 3% for the next couple of months.” – Olu Sonola, head of US economic research for Fitch Ratings.
The new economic data make a vexing challenge even more so for the Federal Reserve. It needs to prudently recalibrate its monetary policy to address escalating inflation. At least one of the indicators is beginning to hold steady. This should be comforting to policymakers as they pursue their mission of fending off economic overheating and reeling in inflation.