On September 14th the Bureau of Labor Statistics released data that showed the overall inflation rate jumped up by .4% to 1.9%. The BLS also released a CPI without the more volatile food and energy prices that only rose by .2% to a level of 1.7% higher than the same month last year. This data will be quite informative on the state of the U.S. economy and could have a major impact on the Fed's future decisions. The Fed has thus far been succeeding relatively well at its mandate of full employment but has generally not been doing as well at its job of price stability. The Fed aims for an inflation rate of 2.0% and has not hit such a benchmark since the April report. This data will be quite important as the Fed considers another rate hike this year and when it will begin selling off its balance sheet. Jim O’Sullivan of High Frequency Economics thinks that “The data help the case for following up the start of Fed balance sheet normalization next week with another rate hike in December, although there will be three more CPI reports before the December decision is made.” While this may be the case the Fed policymakers generally focus on an index based more off of personal consumption expenditures. Chairwoman Yellen has often stressed that one off factors like changing pharmaceutical prices and a drop in wireless data charges have kept this index down.
https://www.ft.com/content/b8b1d036-994d-11e7-a652-cde3f882dd7b
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