Consumer prices rose just 0.2% in September, the Labor Department reported on Tuesday, a slower rate of inflation that suggests that demand for products and services is cooling.
Over the last 12 months, the CPI increased 1.4%.
The consumer price index measures the change in prices paid by consumers for goods and services, such as groceries, clothing, transportation, and medical care. The measurement is taken to determine a change in the cost of living and is used to identify periods of inflation.
When the coronavirus hit the nation and local economies shut down to slow its spread, the CPI was negative for the months of March, April, and May. The index has been positive ever since, but the increases are trending lower. The CPI increased 0.4% in August, compared to 0.6% for June and July.
Accounting for most of the monthly increase in CPI for September was used cars and trucks, which increased 6.7% from August and is the largest monthly increase since February 1969.
The sales of used cars and trucks are up over 10% from last year and far exceed the 1% annual increase in new vehicle sales. Activity pertaining to new vehicles increased 0.3% from September to August.
The energy index rose 0.8% in September, its fourth consecutive monthly increase.
The index also shows that people last month chose eating out over cooking at home. Eating “food away from home” increased 0.6% while “food at home” fell 0.4%.
The overall increase in prices comes as the Federal Reserve wants to see prices increase to allow for an adjustment in its target interest rate of 2%.
The central bank announced in August that it would temporarily allow inflation to run above target as needed to make up for periods of below-target inflation, a major change in strategy that is likely to result in looser money as a means of ensuring faster recoveries.
The alteration of the central bank’s long-term goals, a change a year in the making, reflects the Fed’s experience with the recovery from the Great Recession. During that time, it saw unemployment fall lower than officials ever expected, without stoking the kind of inflation that would have been expected.
The goal is not to raise prices for consumers but to ensure that the economy is operating at full potential.
