Does the news strengthen the case for the Fed's pause on rate hikes?
Price growth in the US continued to cool last month, with a 0.4% overall increase between August and September marking a slower pace than the previous reading.
The annual inflation rate remained unchanged at 3.7% in September, according to new data from the Labor Department, with underlying inflation declining. Core prices – which don’t take food and energy costs into account – were up by 4.1% last month compared with the same time last year, a drop from 4.3% in August.
The latest figures show that hard work remains for the Federal Reserve to bring inflation back towards it 2% target, although the central bank has strongly indicated that it’s likely to leave interest rates untouched at its next meeting after a series of aggressive hikes over the past 18 months.
Core prices increased by 0.3% in September, marking a consistent pace compared with the prior month, although a spike in longer-term interest rates as a result of the Fed’s latest hike could help bring inflation down at a steady clip in the coming months.
The US economy has remained resilient in the face of the Fed’s efforts to tap the brakes, with the labor market posting a strong performance in September and employment gains for the previous months also revised higher.
That buoyancy, coupled with the fact that inflation has ticked downwards in recent months (even at a slow pace), has raised hopes that the Fed will be able to avoid a so-called “hard landing,” bringing down inflation without having to drive the economy into a recession.
