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Inflation increases 5.4% from a year ago, equaling its highest level in 13 years

The unexpected explosion in inflation this year reflects significantly higher prices for food and energy, but also new and used cars, hotel rooms, clothing and furniture, among others goods and services. Covid-19 has closed factories in Asia and slowed down US port operations, leaving container ships anchored at sea and consumers and businesses pay more for goods that don’t arrive for months.

“Price increases resulting from persistent supply chain bottlenecks in a context of high demand will keep the inflation rate high, as supply / demand imbalances only resolve gradually,” said Kathy Bostjancic, economist at Oxford Economics, a consulting firm. “While we share the Fed’s view that this is not the start of an upward spiral in wages and prices, we expect inflation to remain consistently above 3% until the mid-2022. ”

The higher prices also exceed the wage gains that many workers can get from companies, which have to pay more to attract employees. Average hourly wages rose 4.6% in September from a year earlier, a healthy increase, but not enough to keep up with inflation.

Gas prices jumped 1.2% last month and are up more than 42% from a year ago. Electricity prices rose 0.8% in September from August.

Supply chain disruptions continue to push up new car prices, which were up 1.3% last month and 8.7% from a year ago, the largest increase in 12 months since 1980. A semiconductor shortage has restricted vehicle production and left fewer cars at the dealership. a lot.

Used car prices, which soared this summer as Americans scrambled to buy them when they couldn’t find new cars, fell for the second month in a row. Clothing costs also fell, falling 1.1%.

Housing costs have also risen at a steady pace, as builders say they can’t find all the parts and workers they need to build new homes as quickly as they would like. Rents rose 0.5 percent in September and a measure of home prices climbed 0.4 percent. If sustained, these increases will put significant upward pressure on prices, as these two measures account for almost a third of the CPI.

Rapid price increases have increased pressure on the Federal Reserve, which has set its benchmark interest rate near zero to stimulate more borrowing and spending. Yet inflation is well above its 2% target. President Jerome Powell has repeatedly stated that price gains are expected to “weaken” next year, bringing inflation closer to target.

Fed Vice Chairman Richard Clarida echoed this view on Tuesday.

“The untimely surge in inflation this year, once these relative price adjustments are completed and the bottlenecks resolved, will ultimately prove to be largely transient,” he said.

Raphael Bostic, chairman of the Atlanta Federal Reserve, joked Tuesday in separate remarks that “transient” is now seen as the equivalent of a curse at the Atlanta Fed. Bostic said the price spikes primarily reflect the pandemic’s impact on supply chains and added that they are likely to fade away eventually, but that will likely take longer than many Fed officials say. had originally planned.

Price gains are also a vulnerability for President Joe Biden, who has come under attack from Republicans for boosting inflation with his $ 1.9 trillion bailout passed in March of this year.

The White House said on Wednesday it helped secure an agreement to keep the Port of Los Angeles open 24 hours a day, seven days a week, in a bid to alleviate bottlenecks and reduce price pressures.



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