The Consumer Price Index for September is likely to increase by 0.6% on the month and by 3.6% compared to a year ago when the data is released on Oct. 14. But there is the risk of rising oil and energy costs and sticky service-sector inflation pushing the overall inflation rate higher.
The current consensus is that the Federal Reserve will hold its policy rate steady at its October meeting on Oct. 27-28 but will hike rates in December and then again early next year.
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We are also watching the link between inflation and spending. Consumers have remained resilient as prices have continued to increase.
But consumers are also contending with declining real wages, which have been falling since April, set off by the energy shock.
In addition, real wages have not kept pace with rent and food prices since April 2021, as the data visualization shows, despite a robust economic recovery following the pandemic-era recession.
That move in real wages will on the margin start to act as a deadweight on household consumption if it is sustained.
Something to remember as we head into the critical holiday shopping season.
