Everything Is Getting More Expensive

Consumer prices rose more than economists expected last month, new numbers show, on top of an already high August reading. While a jump in prices was expected as the economy recovered from the pandemic shock, persistently high inflation is complicating plans for both the Fed and the White House, who face pressure to act so that price gains don’t become a permanent fixture.

Americans are paying more for dinner, fuel and housing, and wage gains, while decent, aren’t keeping up. Hopes that a spike in prices would quickly fade — that pandemic-induced inflation would be “transitory,” to use the economic lingo — are being challenged by rising prices for a wide range of items: Meat rose by nearly 13 percent in the year to September, gasoline was up 42 percent and rent rose by more than 3 percent (double the rate six months ago).

What it means for the Fed: As the central bank prepares to remove emergency stimulus measures to support the economy, sustained inflation could force the Fed to move faster than it would like, before the labor market is fully healed. In newly released minutes from their latest policymaking meeting, Fed officials appear split, with “various” members arguing that interest rates should stay near zero for a couple of years, while “a number” said that rates would need to go up next year, with inflation most “likely to remain elevated in 2022 with risks to the upside.” A recent Fed survey suggests that consumer expectations for inflation are running at historic highs.