Inflation Persists Amid Robust Consumer Spending and Economic Growth

The Federal Reserve’s inflation monitor for September has indicated continuous price hikes, driven by strong consumer spending and economic growth. The data, released today, shows a consistent 0.4% price increase from August, mirroring the previous month’s rise. The annual inflation rate remains steady at 3.4%, surpassing the Fed’s 2% annual inflation target. This rise in prices is contributing to higher costs for essential items such as rent, food, and gas.

Since March 2022, the central bank has increased its key rate from nearly zero to around 5.4% in an effort to curb inflation. This rate peaked at a substantial 9.1% in June of last year. Despite these measures, consumer spending has remained strong, driving a notable 4.9% annual growth rate in the third quarter (July-September). This robust spending has led businesses to raise prices across various sectors.

Excluding volatile food and energy costs, core prices rose by 0.3%, with core inflation moderating to 3.7%, the slowest pace since May 2021. Consumer spending increased a robust 0.7% last month, aligning with the central bank’s forecast for this quarter.

Federal Reserve Chair Jerome Powell anticipates a “proceed carefully” approach in the coming months, suggesting that the central bank will continue to closely monitor inflation trends and economic indicators before making further policy decisions. These statistics underscore a resilient consumer sector that continues to support economic growth despite persistent inflation and high-interest rates. The widespread expenditure across various sectors of the economy is intensifying inflation further.

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