US inflation soft as consumer price index climbs in line with expectations

The US consumer price index for September met expectations, increasing 0.2 per cent, following August's 0.1 per cent rise.

Excluding food and energy, though, prices went up by only 0.1 per cent for the month - the same increase as in August and below the consensus prediction of a 0.2 per cent rise.

All the major energy component indexes went up in September. The food index was unchanged, with declines in fruits and vegetables and soft drinks offsetting increases in other indexes. Over the last year, the food index has risen 1.4 per cent, but energy has declined 3.1 per cent.

The all items index rose 1.2 per cent over the last 12 months - the smallest yearly increase since April. Without food and energy, the index rose 1.7 per cent in the last year, with shelter and medical care both up by 2.4 per cent.

Capital Economics' Paul Dales says that the fall in year-on-year inflation to 1.2 per cent, from 1.5 per cent in August, is not "due to a marked weakening in price pressures", but is because the 0.2 per cent month-on-month rise compares favourable to the unusually large 0.5 per cent gain last September. Better measures of the current trend are, he says, the 3-month annualised rate of headline prices, which is 1.7 per cent, and of core prices, which is 1.6 per cent. "They suggest the Fed needn’t worry too much about low inflation."