The U.S. government will make its next monthly inflation report Thursday, and it’s generally expected that it will show inflation is cooling off.
The Bureau of Labor Statistics will release its latest round of price data in the morning. Experts think it will show that overall prices for consumers rose by 0.2% compared to August and 3.6% compared to a year ago.
Meanwhile, core inflation, a measurement of cost increases that removes energy and food prices because of their volatility, is expected to be up 4.1% from September last year.
Both of those figures would show that prices rose less in September than they did in August. Prices for consumers rose in August because the cost of gasoline had spiked 10% from July.
The report Thursday morning might be especially significant for the trajectory of the economy.
The Federal Reserve raised interest rates sharply from March 2022 through this summer as it tried to get inflation under control. Inflation had hit 40-year highs in mid-2022, peaking at 9.1% annually, and it has generally slowed since then.
That doesn’t mean prices are lower than they were. Instead, they’re rising at a slower rate. Still, those slower increases have been a relief to some consumers, and wages have been rising faster than inflation recently, which makes it easier for people to afford goods and services.
What about interest rates going forward?
The Fed left rates unchanged in September, saying there had been progress in its fight against inflation. It’s in wait-and-see mode now.
But after 12 consecutive monthly declines, inflation sped up again in July and August. The increases were small, and there were reasons experts weren’t especially concerned about them — for example, gas prices spiked 10% in August, and that hasn’t happened again.
Still, Raul Diaz, a regional senior investment officer at Northern Trust, said there’s no guarantee inflation will continue to trend down.
‘Inflation could reignite given that the labor market has been very resilient and the U.S. is a very consumer-based economy,’ Diaz said.
If the data shows inflation stayed higher than expected in September, especially in core areas, it might push the Fed to start raising interest rates again.
That would slow the economy further by making it more expensive for people and businesses to borrow money, and it would push mortgage rates even higher.
The Fed will announce its next decision on rates on Nov. 1. Its main rate is now in the range of 5.25% to 5.5%, the highest since 2000.
While inflation remains higher than the Fed’s goal of 2% a year, experts say there are signs things are going in the right direction even as the economy holds up fairly well.
That’s one reason the Fed left interest rates alone in September. But another higher-than-expected inflation report would challenge that viewpoint.
Like interest rates, mortgage rates are at 23-year highs, which has made it much harder for people to afford homes.
Diaz told NBC News that’s just one challenge facing consumers and the economy in general. He said higher interest rates, the end of the pause on federal student loan payments, the recent increase in gas prices and dwindling personal savings are all likely to affect spending by consumers in the months ahead. It’s why he and Northern Trust think economic growth might be pretty weak over the next year.
‘We’re not predicting a recession over the next 12 months. We just think that growth is going to be positive but pretty low,’ he said.