Inflation Increases 8.2% Year Over Year in September as Prices Continue to Climb
The Bureau of Labor Statistics (BLS) announced that the U.S. consumer price index (CPI) rose 8.2% year over year in September 2022, remaining near a 40-year high. The increase was not anticipated by experts, who expected a slowdown as the Federal Reserve (Fed) continued to hike interest rates.
The CPI changed little in September, still causing financial pain for many U.S. households. Specifically, high prices for shelter, food and medical care drove the CPI for all urban consumers for September up by 0.4% compared to August’s 0.1%. Food costs reflect higher energy costs, and experts predict that food price inflation will remain a problem for the next couple of months.
“Inflationary momentum has built up in the U.S. economy and will persist near-term, keeping the Fed hiking aggressively.”
- Bill Adams, chief economist, Comerica Bank
The housing market has seen the most immediate impact of the Fed’s rate hikes. At nearly 7%, mortgage rates are at their highest levels in nearly two decades, decelerating home price growth and triggering prices to fall in some U.S. cities.
However, pressure remains on the wages of U.S. workers as pay raises are not keeping up with rising prices. Meanwhile, the Social Security Administration recently announced its cost-of-living adjustment. Starting in January 2023, the maximum earnings subject to the Social Security payroll tax will increase by nearly 9% to $160,200—up from the $147,000 maximum for 2022.
What’s Next?
There’s no denying inflation still has a grip on the U.S. economy. Resilient inflation means the Fed is likely to continue with interest rate hikes in an attempt to slow the economy. All of these signs are likely to increase recession concerns.
Unfortunately, high inflation means the buying power of workers’ take-home pay has been shrinking. The BLS reported that real (inflation-adjusted) average hourly earnings dropped 3% from September 2021 to September 2022. The Federal Reserve Bank of Dallas further notes that the wage decline is “the most severe faced by employed workers over the past 25 years.” Thus, it’s no surprise that many American workers report that they’re struggling financially.
Discussing financial and investment goals with a financial advisor can be helpful. If you have additional questions or need resources for financial assistance, speak to your employer.
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