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Inflation gains momentum

(The Spokesman-Review)
Associated Press
(The Spokesman-Review)

WASHINGTON — Consumer prices picked up momentum in September, especially hitting the pockets of people paying for medical care, education costs and filling up gas tanks.

Although out-of-control inflation is not a current danger to the economy, analysts said the acceleration justifies an interest rate increase by the Federal Reserve at its Nov. 10 meeting — which would be the fourth such increase this year to ensure inflation doesn’t become a problem.

The government’s most closely watched inflation measure, the Consumer Price Index, increased 0.2 percent in September, up from a 0.1 percent rise in August, the Labor Department reported Tuesday.

Excluding energy and food prices, which can swing widely from month to month, “core” prices rose 0.3 percent in September. That followed a 0.1 percent increase in August and marked the largest gain since April.

Last month’s advance in core prices mostly reflected a sharp increase in lodging costs, not a widespread acceleration in the prices of many other goods and services, economists noted. Given that, September’s increase in core prices rings no alarm bells but bears watching, analysts said.

The overall CPI figure, which showed a 0.2 percent increase in September, matched economists’ expectations. The 0.3 percent rise in core prices, however, was slightly above the 0.2 percent increase some economists were forecasting.

The CPI report “keeps the Fed on track for raising interest rates again in November,” said Lynn Reaser, chief economist at Banc of America Capital Management.

In another report, housing construction fell 6 percent in September to a seasonally adjusted annual rate of 1.898 million units, the Commerce Department said. The decline, steeper than analysts expected, followed a 1.8 percent rise in August. Housing permits, however, rose a solid 1.8 percent last month.

Federal Reserve Chairman Alan Greenspan said in a speech Tuesday that the record level of debt carried by American households and soaring home prices do not appear to represent serious threats to the economy.