Fresh inflation data expected to show slight cooldown

(NEW YORK) — Inflation data to be released on Thursday will show whether price increases cooled or accelerated in September, offering the latest snapshot of expenses faced by U.S. households as the Federal Reserve readies to decide another rate hike next month.

Economists expect consumer prices to have increased 3.6% over the year ending in September.

That finding would mark a slight slowdown from the annual inflation rate recorded the previous month but would remain more than a percentage point higher than the Fed’s inflation target.

The data arrives roughly three weeks before the Fed plans to make its latest rate-hike decision. Last month, the Fed left its benchmark interest rate unchanged, noting that it expects to raise rates one more time this year.

Mixed signals from the economy in recent weeks have complicated the Fed’s effort to bring down inflation while averting a recession, an outcome known as a “soft landing.”

A rapid rise in U.S. government bond yields over recent weeks has elevated borrowing costs for consumers seeking mortgage loans and corporations pursuing funds to expand their business. The jump in borrowing expenses threatens to slow economic activity in the coming months.

However, a blockbuster jobs report on Friday showed that employers added 336,000 jobs in September, exceeding economist expectations by nearly twofold and reversing a monthslong hiring slowdown.

The unemployment rate held steady at 3.8%, a historically low figure, government data showed.

The robust hiring suggests that businesses remain willing to add workers, despite an aggressive series of interest rate hikes over the past year.

The good economic news may pose a difficulty for the Federal Reserve, however, as it tries to cool the economy and slow down price increases.

While the breakneck hiring could alarm central bankers, a simultaneous moderation of wage growth shown by the data on Friday could alleviate fears of upward pressure placed on prices in the event of a sharp rise in worker pay.

Wages increased 4.2% on an annual basis last month, exceeding the inflation rate but falling well below the 6% pace recorded in March, data showed.

Inflation stands well below a peak of about 9% last summer, but the Fed remains far from its target rate, Fed Chair Jerome Powell said at a press conference in Washington, D.C., last month.

“The process of getting inflation sustainably down to 2% has a long way to go,” Powell said.

“Given how far we have come, we’re in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” Powell added.