The pace of price increases over the past year took an unexpected step higher in September as policymakers contemplate their next move on interest rates, according to a Labor Department report Thursday.
The consumer price index, a broad gauge measuring the costs of goods and services across the U.S. economy, increased a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.4%. Both readings were 0.1 percentage point above the Dow Jones consensus.
Excluding food and energy, core prices increased 0.3% on the month, putting the annual rate at 3.3%. Both core readings also were 0.1 percentage point above forecast.
Much of the inflation increase — more than three-quarter of the move higher — came from a 0.4% jump in food prices and a 0.2% gain in shelter costs, the Bureau of Labor Statistics said in the release. That offset a 1.9% fall in energy prices.
Other items contributing to the gain included a 0.3% increase in used vehicle costs and a 0.2% rise in new vehicles. Medical care services were up 0.7% and apparel prices surged 1.1%.
The release comes as the Federal Reserve has begun to lower benchmark interest rates. After a half percentage point reduction in September, the central bank is expected to continue cutting, though the pace and degree remain in question.
Fed officials have become more confident that inflation is easing back towards their 2% goal while expressing some concern over the state of the labor market.
In other economic news Thursday, initial filings for unemployment benefits took an unexpected turn higher, hitting 258,000 for the week ending Oct. 5. That was the highest total since Aug. 5, 2023 a gain of 33,000 from the previous week and well above the forecast for 230,000.
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