Inflation Stable in September, Underlying Price Gains Stay Modest

Inflation held steady in September but underlying gains were subdued, providing the Federal Reserve evidence that price pressures are slowly abating despite signs of continued strength in the labor market.

Prices rose at a 0.4% pace in September from the prior month and 3.7% from a year earlier, the Labor Department said Thursday. The monthly gain represents a cooling from August’s 0.6% increase, which was driven by higher energy prices. The 12-month rate was the same as in August.

When excluding volatile food and energy items, so-called core prices increased 0.3% in September, the same as the prior month’s increase and a continuation of mild readings through the summer months. Core prices rose 4.1% in September over the prior year, down from August’s 4.3%.

Continued slower increases in core prices, combined with some moderation of wage gains and a jump in bond yields, may lead Fed policy makers to conclude that further rate increases this year aren’t necessary. If so, the recent series of rate rises may have reached its peak after lifting the benchmark federal-funds rate to its highest level in 22 years.

Fed Chair Jerome Powell stressed after the September decision to hold rates steady that officials would base their monetary policy on new data, with Thursday’s CPI report providing figures for judging the effects of the central bank’s inflation-fighting campaign.