Distinct trends forming among CPI measures. Descending from a June peak of 9.0 percent, the headline Consumer Price Index rose by a year-over-year rate of 8.2 percent in September. Much of this recent downshift has been driven by declining gasoline prices, a trend that could prove temporary. The war in Ukraine, OPEC production cutbacks and a series of domestic maintenance issues are limiting oil supplies, while the ability to pull from the Strategic Oil Reserve may soon close as stockpiles dwindle. At the same time, other consumer costs are climbing faster. Core CPI, which omits the energy category along with food, jumped 6.6 percent over the past 12 months, a 40-year high. The ascending costs for services, including transportation and medical care, drove much of this increase. While the recent downturn in gas prices was undoubtedly helpful to consumers, elevated inflation will continue until core pressures are tamped down.

September data may push Fed to greater acts. Accelerated core inflation, paired with ongoing job creation, may galvanize the Federal Reserve toward even more aggressive actions. The central bank has already raised the overnight lending rate by 300 basis points so far this year. Beginning 2022 at a 0 percent lower bound, the Fed has previously stated intentions to increase the measure above 4 percent before the start of 2023. The Fed would have to hike the rate by a collective 125 basis points to achieve this. September’s steep core CPI jump, against an unemployment rate that fell back to a historical low, may prompt the Federal Open Market Committee to raise rates even more. The FOMC has already made clear it is looking to push up unemployment and soften the labor market, in order to help curb upward wage pressure and its impact on inflation

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* As of September Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Federal Reserve; Real Capital Analytics; RealPage, Inc.; U.S. Census Bureau