Inflation holds grip on the U.S. economy as September rate hits 8.2%

The annual U.S. inflation rate was little changed last month, hitting 8.2% year over year compared with August's 8.3% reading as the pace of price increases remains at multidecade highs, causing pain for many households.

High prices for food, shelter and medical care sent the consumer price index for September up by 0.4%, compared to August's 0.1%, according to data the Bureau of Labor Statistics released Thursday morning.

Markets opened lower following the news as investors tried to gauge how the Federal Reserve will respond.

Inflation remains at the top of Americans' minds going into the last quarter of a year of across-the-board volatility in food, gasoline and energy prices.

While the Biden administration has sought to address the issue through measures like the Inflation Reduction Act, the provisions in that law are set to take effect over 10 years, and at least two separate models predict its actual impact on inflation will be statistically insignificant.

So the burden of bridling a stubborn inflation rate sits at the doorstep of the Federal Reserve. The central bank has already increased its benchmark rate five times this year — which included three consecutive 0.75% hikes — to make borrowing and spending money more expensive to cool off consumer demand.

At its most recent Federal Open Market Committee meeting, Fed officials largely agreed that it was better to aggressively raise interest rates now to avoid economic pain down the road.

The housing market has felt the most immediate impact of the Fed's rate-raising scheme. At nearly 7%, mortgage rates are at their highest levels in close to two decades, which has slowed home price growth in its tracks and caused prices to fall in some cities.

Comerica Bank chief economist Bill Adams said house prices and rents are likely to decline throughout the U.S. in the coming months.

What remains to be seen, he said, is whether other key costs, especially those for food, will also come down. Lowering those expenses might be out of the federal government's hands, he said.

For Subscribers

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

FOR SUBSCRIBERSCornell rape allegation spotlights stringent New York state laws that have long drawn criticism

FOR SUBSCRIBERSThe debate over AI’s future rages on both coasts

FOR SUBSCRIBERSDecades-old march dispute reignites in Northern Ireland, threatening political crisis

For Subscribers

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

FOR SUBSCRIBERSCornell rape allegation spotlights stringent New York state laws that have long drawn criticism

FOR SUBSCRIBERSThe debate over AI’s future rages on both coasts

FOR SUBSCRIBERSDecades-old march dispute reignites in Northern Ireland, threatening political crisis

"There's definitely still a Russia-Ukraine effect keeping food prices elevated," he said. "Commodities futures prices for grain have been high since the start of the Russian invasion."

Food costs also reflect higher energy costs, he said, and while gas price declines last month likely affected the headline inflation reading, Adams noted that pump prices have already begun to climb back up amid higher demand. In addition, OPEC+ announced last week it would cut oil production by 2 million barrels a day, which sent crude oil prices to nearly $98 last Friday.

Finally, an apparent shortage of workers has continued to put upward pressure on wages, Adams said. Last month, the unemployment rate hit 3.5%, tying the pre-pandemic low and suggesting most people who want to find work are able to do so while also commanding higher wages.

"Food price inflation is going to stay a problem in U.S. for the next couple of months," Adams said. "Wage growth in the U.S. is considerably faster than it was pre-pandemic, especially in lower-paying occupations like food services."

CORRECTION (Nov. 1, 2022, 5:20 p.m. ET): A previous version of this article misstated the name of a Federal Reserve committee. It is the Federal Open Market Committee, not Federal Open Markets Committee.