Inflation rises 5.4 percent from year ago, matching 13-year high
4 min read
The unexpected burst of inflation this year reflects sharply higher prices for food and energy.
The unexpected burst of inflation this year reflects sharply higher prices for food and energy, but also for furniture, cars, televisions, and other largely imported goods. COVID-19 has shut down factories in Asia and slowed U.S. port operations, leaving container ships anchored at sea and consumers and businesses paying more for goods that may not arrive for months. "Price increases stemming from ongoing supply chain bottlenecks amid strong demand will keep the rate of inflation elevated, as supply/demand imbalances are only gradually resolved," said Kathy Bostjancic, an economist at Oxford Economics, a consulting firm. "While we share the Fed's view that this isn't the start of an upward wage-price spiral, we look for inflation to remain persistently above 3% through mid-2022." The latest inflationary data makes it even more likely that the Fed will soon begin reducing its $120 billion a month in bond purchases, which are intended to keep longer-term interest rates low. Most analysts expect the Fed to announce such a move at its next meeting Nov. 3. Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, which are having 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. One good sign in September was that prices fell or moderated in categories that had been initially pushed much higher by the pandemic. Those declines kept core price increases from worsening. Used car prices declined 0.7% last month, the second straight drop, after costs soared over the summer as consumers, unable to find or afford a new car, turned to used instead. The costs for hotel rooms, car rentals, and airline tickets…