Consumer prices rose 0.4 percent in September, up 5.4 percent over last year

Consumer prices rose 0.4 percent in September and 5.4 percent in the year leading into last month, according to data released Wednesday by the Labor Department.

The consumer price index (CPI), which tracks inflation, rose at a slightly faster rate than expected last month largely due to sharp increases in food and energy prices, which are typically more volatile. Economists expected the CPI to rise 0.3 percent last month.

The CPI without food and energy prices, known as  “core inflation,” rose 0.2 percent last month, in line with expectations.

Inflation has lingered at decades-plus highs for much of 2021 as the swift rebound in economic activity and federal stimulus efforts strained supply chains and manufacturers still struggle to meet higher demand. 

Many economists, along with Biden administration and Federal Reserve officials, believe inflation will cool off as the economy works out the kinks of the new phase of the pandemic and supply chains adjust to new obstacles. 

“I believe it’s transitory, but I don’t mean to suggest these pressures will disappear in the next month or two,” Treasury Secretary Janet Yellen said in a Tuesday interview on CBS Evening News.

But inflation has run hotter for longer than many have expected, posing another challenge for the economy and a political threat for Biden and Democrats.

“Price increases stemming from ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated as supply/demand imbalances are only gradually resolved,” wrote Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

Sharp increases in food, shelter and energy prices were the primary driver of September’s inflation, while prices for airlines fares, apparel and used cars all continued to fall after spiking earlier in the year.

The Bureau of Labor Statistics said more than half of the September increase in the CPI came from a 0.9 percent increase in food prices and 0.4 percent increase in shelter prices. Prices for food at home skyrocketed from a 0.4 percent increase in August to a 1.2 increase last month.

The rate of energy price increases fell from 2 percent in August to 1.3 percent in September, and inflation in gasoline prices fell from 2.8 percent to 1.2 percent. But fuel oil prices jumped dramatically from a 2.1 percent decrease in August to 3.9 percent increase last month.

While the rate of inflation on whole may be cooling, the steady increase in prices for key consumer staples can weigh heavily on those with tight budgets.

Prices for meat, poultry, eggs and fish were 10.5 percent higher in September than a year ago, with beef and veal prices rising 17.6 percent annually. Prices for food at home in general are up 4.5 percent on the year, and gas prices have increased a whopping 42 percent from last year, when they plummeted as the pandemic severely restricted travel.

Hours before the release of the inflation data, the White House announced several steps major shipping companies, ports, labor unions and retailers would take to clear up supply chains and shortages. Biden is set to meet with leaders from those groups Wednesday as the White House pushes to tamp down inflation, fend off political attacks from Republicans and reassure Americans they’ve got the problem under control.

Higher inflation is also expected to boost pressure on the Fed to consider raising interest rates sooner than they had planned. 

The Fed is expected to announce next month its plan to taper its monthly purchases of Treasury bonds and mortgage-backed securities, which began in March 2020 to stabilize financial markets. While Fed Chair Jerome Powell and several officials have ruled out hiking interest rates from near-zero levels until the labor market is near full employment, hawkish members may try to push the bank to a quicker liftoff.

Updated at 9:23 a.m.