WASHINGTON (Reuters) – U.S. consumer prices increased for a fourth straight month in September, with the cost of cars and trucks rising by the most since 1969, though inflation is slowing amid labor market slack as the economy gradually recovers from the COVID-19 recession.
While the benign report from the Labor Department on Tuesday will have no direct impact on monetary policy, it should allow the Federal Reserve to keep interest rates near zero for a while and continue with massive cash infusions as it nurses the economy back to health.
The U.S. central bank is now more concerned about the labor market and has embraced flexible average inflation targeting, which in theory could see policymakers tolerate price increases above its 2% target for a period of perhaps several years to offset years in which inflation was lodged below its goal.
At least 25.5 million people are on unemployment benefits.
The consumer price index rose 0.2% last month after gaining 0.4% in August. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand.
A 6.7% jump in the prices of used cars and trucks accounted for most of the increase in the CPI last month. That was the biggest gain since February 1969 and followed a 5.4% advance in August. There were also increases in the costs of new vehicles and recreation. But prices for motor vehicle insurance, airline fares and apparel fell.
In the 12 months through September, the CPI increased 1.4% after rising 1.3% in August. Economists polled by Reuters had forecast the CPI climbing 0.2% in September and rising 1.4% year-on-year.
Excluding the volatile food and energy components, the CPI rose 0.2% last month after increasing 0.4% in August. In the 12 months through September, the core CPI gained 1.7%, matching August’s increase.
The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index rose 1.6% in the 12 months through August. September’s core PCE price index data is scheduled to be released at the end of this month.
U.S. financial markets were little moved by the CPI data.
Last month, gasoline prices edged up 0.1% after rising 2.0% in August. Food prices were unchanged after nudging up 0.1% in August. The cost of food consumed at home fell 0.4%, declining for a third straight month.
Housing inflation was muted last month as high unemployment makes it harder for landlords to raise rents. The pandemic has also fueled a migration to suburbs and other low-density areas from urban centers, which over time could result in higher vacancy rates for apartments and restrain rent growth.
Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, ticked up 0.1% after a similar gain in August.
The cost of recreation rose 0.2% last month after rebounding 0.7% in August. Apparel prices decreased 0.5% after rising for three consecutive months.
The cost of motor vehicle insurance declined 3.5% and prices of airline fares dropped 2.0%. Healthcare costs were unchanged after gaining 0.1% in August.
Education costs fell 0.3% after dropping by the same margin in August, which was the first decline since the series started in 1993. Many schools and universities have shifted to online classes because of the pandemic.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci