US consumer inflation slowed to a still high 8.2% over the past 12 months, putting further pressure on households

Inflation in the United States accelerated in September, with the cost of housing and other necessities adding to the pressure on households, eradicating wage increases that many had received and ensuring the Federal Reserve will continue to raise interest rates aggressively.

Consumer prices rose 8.2% in September from a year earlier, the government said on Thursday. On a monthly basis, prices rose 0.4% in August-September after rising 0.1% in July-August.

Aside from the volatile food and energy categories, so-called core inflation surged last month – a sign that the Fed’s five rate hikes so far this year have done little to ease inflationary pressures. Core inflation rose 0.6% August-September and 6.6% over the trailing 12 months. The annual core number is the largest increase in 40 years. Core prices usually provide a clearer picture of the underlying price trends.

Major U.S. markets swayed sharply lower, with Dow Jones Industrial Average futures soaring from several hundred points to a 400-point drop in seconds. The markets in Europe also collapsed.

Thursday’s report represents the final US inflation numbers ahead of the Nov. 8 midterm elections after a campaign season in which rising prices have fueled public concern, with many Republicans blaming President Joe Biden and congressional Democrats.

Inflation has pushed up families’ food bills, rents and utilities, among other things, causing difficulties for many and deepening pessimism about the economy, despite strong job growth and historically low unemployment.

As the election approaches, Americans are feeling worse about their finances, according to a new poll from the Associated Press-NORC Center for Public Affairs Research. About 46% of people now describe their personal financial situation as poor, up from 37% in March. This sizeable drop contrasts with the mostly stable readings that had persisted throughout the pandemic.

September’s inflation numbers are unlikely to change the Fed’s plans to continue raising interest rates aggressively to bring inflation under control. The Fed has raised its short-term interest rate by 3 percentage points since March, the fastest pace since the early 1980s. These increases are expected to raise the cost of borrowing for mortgages, auto loans and business loans and cool inflation by slowing the economy.

The minutes of the last Fed meeting in late September showed that many policymakers still see no progress in their fight against inflation. Officials predicted that they would raise interest rates by another 1.25 percentage points at their next two meetings in November and December. This would take the Fed’s interest rate to its highest level in 14 years.

In addition to lower gasoline prices, economists expect used car prices to lower or at least curb inflation in the coming months. Wholesale used car prices have fallen for most of this year, although the falls are yet to be reflected in consumer inflation data. (Used car prices had skyrocketed in 2021 after factory closures and supply chain bottlenecks reduced production.)

Big retailers have also started offering early discounts for the holiday shopping season after amassing excess stocks of clothing, furniture and other goods earlier this year. These price cuts may have lowered inflation in September or will do so in the coming months.

Walmart has announced it will be offering steep discounts on items like toys, home goods, electronics and beauty. Target started offering vacation deals earlier this month.

However, the prices of services – particularly rents and housing costs – remain persistently high and are expected to fall for much longer. Health services, education and even veterinary services are still increasing in price rapidly.

“Price increases in services tend to be more persistent than increases in the price of goods,” noted Raphael Bostic, President of the Federal Reserve Bank of Atlanta, in a statement last week.

Rising rental costs are a hot topic for the Fed. Real-time data from sites like ApartmentList suggests rents for new rentals are starting to fall.

But the government measure tracks all rent payments — not just those for new leases — and most of them don’t change from month to month. Economists say it could take a year or more for the fall in new rentals to impact government data.