By Andrew Miller
Gas prices jumped 9.1% last month, accounting for more than half of the overall rise in inflation.
According to the latest CPI report, consumer prices are up 3.7% over the past year. Even with food and energy stripped out, prices still rose more than economists expected. That measure, called core inflation, climbed 2.6% over the year.
It was the second month in a row that inflation came in hotter than forecast. That puts the Federal Reserve in a difficult position.
The Fed uses interest rates as its main tool for slowing inflation. It raised rates for the first time in years back in September. The Fed meets again on October 27 and 28.
Markets are split almost evenly on whether it hikes again or holds steady this time around.
The split boils down to a few reasons. A rate hike can cool an overheating economy, but much of this increase is due to energy prices driven higher by a war the Fed can’t control.
With a price shock like this, the Fed may choose to simply wait out rather than raise rates in response. Waiting was exactly what Fed officials signaled they were willing to do.
However, that was before the CPI report for September came out.
For now, the rate stands where the Fed left it. The next decision comes on October 28.
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