US annual inflation rate gains amid higher oil prices

The annual US inflation rate, based on the Consumer Price Index (CPI), advanced 3.7% last month, according to the US Bureau of Labor Statistics (BLS).

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The year-on-year inflation data has moved higher from the 3.4% growth seen in August.

Brent crude was already trading at elevated levels when the latest inflation data was released, amid escalating hostilities in the Middle East.

“The CPI report itself was difficult to wave away as another energy distortion,” according to SPI Asset Management managing partner Stephen Innes.

High oil prices tend to push headline inflation higher, at least in the short term.

The inflation data ran “broad enough to revive the hawks,” Innes noted, putting the odds of a US Federal Reserve (Fed) interest rate hike above 50% for October and near certainty at over 95% by December.

Higher interest rates in the US can dampen demand growth and make dollar-denominated commodities like oil more expensive for holders of other currencies.

On a month-on-month basis, the US inflation rate increased by 0.6% in September, slightly higher than the 0.4% growth noted in August.

“Hotter inflation lit the fuse, oil refused to behave,” Innes added.

Notably, the US central bank remains focused on bringing annual inflation down to its 2% target.

By Aparupa Mazumder

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