MNI BRIEF: Sept CPI Shows Surprise Price Rebounds -Fed's Meyer

The September CPI report and alternative underlying inflation measures showed signs of upward price pressure that are "less supportive of a swift return to price stability," Atlanta Fed economist Brent Meyer said in a note shared with reporters Thursday.

Higher energy prices and a "somewhat-surprising" rebound in rents accounted for more than three-quarters of the overall CPI monthly increase of 0.4%, a tenth higher than markets had expected, but core CPI rose at an annualized rate of 3.9%, higher than its 3-month and 6-month annualized rates. A "supercore" measure of non-shelter core CPI added just 0.9% annualized, but if the sharp decline in used car prices last month was excluded, that measure was up 2.9% annualized in September and 2.8% from a year ago. (See: MNI INTERVIEW: Fed Done Hiking, Will Cut As Soon As Q1-Tilley)

The price change distribution was also "particularly noisy," with spikes in alcohol and food and recreation services costs, possibly reflecting continued revenge spending, Meyer said. Over half of the CPI by expenditure-weight rose at above-5% rates, the highest share since February, and 57% of non-shelter core CPI prices rose at above-3% rates, well above the 2019 average share of 37%, he noted.

"Put bluntly, this is not the CPI report we were looking for," he said. "September’s report did not deliver the clear, concise evidence of slowing inflationary pressures that we were hoping for. Like last week’s jobs numbers, this one’s a head-scratcher."