WASHINGTON - Higher energy costs fueled U.S. consumer prices in September, but overall inflation remains in check as it has for the past several years.
The Labor Department said Tuesday that consumer prices increased 0.3 percent last month. Much of that rise stemmed from energy, housing and medical care commodities. Energy costs surged 2.9 percent in September as oil and gasoline prices rebounded from recent lows.
Previous price declines mean gas still costs 6.4 percent less than a year ago.
Core inflation, which excludes the volatile categories of food and energy, rose 0.1 percent.
Inflation has stayed relatively low despite job growth that has brought more workers into the economy. Until last month, the modest levels of inflation largely came from muted oil prices and a stronger dollar.
With inflation a minimal risk, the Federal Reserve has held down short-term interest rates in hopes of spurring more borrowing and spending to boost economic growth. The markets anticipate that the Fed will keep rates steady at its November meeting and then hike rates at its upcoming meeting in December, which would be the second increase in a year.
Said Capital Economics’ economist Paul Ashworth: “With the rate at which labor market slack is being absorbed also slowing this year, the stabilization in core inflation supports the Fed’s cautious approach to normalizing interest rates.”
But the low levels of inflation have also limited incomes for older Americans who receive Social Security. Their annual increase in payments will be 0.3 percent after being unchanged for this year.
Over the past 12 months, core inflation has increased 2.2 percent. But the entire consumer price index has risen at a gradual yearly pace of 1.5 percent, undershooting the Federal Reserve’s target of a 2 percent increase.
“As the declines in energy prices late last year continue to drop out of the annual rate calculation,” noted Ashworth, “headline inflation will rebound into line with the core rate early next year.”