The pace of price increases last year was higher than forecast in September, while jobless claims saw an unexpected rise after Hurricane Helene and the Boeing strike, the Labor Department reported Thursday.
The consumer price index, a broad measure of the cost of goods and services across the U.S. economy, rose a seasonally adjusted 0.2% for the month, translating to an annual inflation rate of 2.4%. Both values were 0.1 percentage points above the Dow Jones consensus.
The annual inflation rate was 0.1 percentage points below August and is the lowest since February 2021.
Excluding food and energy, core prices rose 0.3% month-on-month, an annual rate of 3.3%. Both core values were also 0.1 percentage points above the forecast.
A separate report on Thursday showed weekly jobless claims hit a 14-month high, pointing to a possible weakening in the labor market, despite the strong rise in nonfarm payrolls in September. However, most of the increase could be related to the hurricane and the strike.
Much of the increase in inflation – more than three-quarters of the increase – was due to a 0.4% increase in food prices and a 0.2% increase in housing costs, the Bureau of Labor Statistics said in the release. This offset a 1.9% decline in energy prices.
Other factors contributing to the increase included a 0.3% increase in used car costs and a 0.2% increase in new car costs. Medical care services rose 0.7% and clothing prices rose 1.1%.
Stock market futures fell after the report, while Treasury yields were mixed.
The release comes as the Federal Reserve has begun cutting interest rates. After a half-percentage point cut in September, the central bank is expected to continue cutting interest rates, although the pace and extent remain questionable.
Fed officials have become more confident that inflation will fall back toward its 2 percent target, but at the same time expressed some concern about the state of the labor market.
“It's the overall trend that's important, not the day-to-day fluctuations,” Chicago Fed President Austan Goolsbee said in an interview on CNBC's “Squawk on the Street” after the release. “The general trend over 12, 18 months clearly shows that inflation has fallen sharply and the labor market has cooled to a level that we believe is close to full employment.”
Although the CPI is not the Fed's official inflation barometer, it is part of the dashboard that central bank policymakers use to make decisions. Several of its components feed directly into the Fed's main price index for personal consumption expenditures.
Although the inflation reading came in higher than expected, traders in futures markets increased their bets that the Fed would cut interest rates by a quarter of a percentage point at its Nov. 6-7 policy meeting to about 86%, according to the CME's FedWatch Indicator Group.
Goolsbee said the data is broadly consistent with the Fed's expectations and should not be viewed in isolation because it has an outsized impact on policy.
“I just want to warn everyone: let’s calm down when the monthly figures are available,” he said. “That is not what we should base monetary policy on. We should base them on the long part.”
In recent days, policymakers have said they see rising risks in the labor market, and another data point on Thursday reinforced that statement.
Initial jobless claims rose unexpectedly, reaching a seasonally adjusted 258,000 in the week ended October 5. That was the highest number since August 5, 2023, an increase of 33,000 from the previous week and well above the forecast for 230,000.
Current claims, which are a week behind, rose to 1.861 million, an increase of 42,000.
The jobless claims figures follow damage from Hurricane Helene, which hit much of the Southeast on September 26. According to unadjusted data, Florida and North Carolina, two of the hardest-hit states, saw a combined increase of 12,376.
A strike by 33,000 Boeing workers could also affect the numbers. Michigan saw the largest increase in claims over the week, up 9,490.
As for inflation, rising prices in various food categories showed that it is proving stubborn.
Egg prices jumped 8.4%, bringing the unadjusted 12-month gain to 39.6%. Butter rose 2.8% month-over-month and 7.8% year-over-year.
However, housing costs, which were higher this year than Fed officials expected, rose 4.9% year-on-year, a decline that could suggest that overall price pressures are easing in the future. The category accounts for more than a third of the total weight in calculating the CPI.
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