Key inflation measure climbs to 40-year high as Fed efforts ring futile and shoppers brace for more pain

• The Consumer Price Index rose 8.2% in the year through September, the government said Thursday.
• That landed above economist forecasts and marked a very small slowdown from the August pace.

The Federal Reserve's race to cool inflation is turning into a marathon.

The core Consumer Price Index — an inflation measure that excludes volatile food and energy prices — rose 6.6% in the year through September, the Bureau of Labor Statistics announced Thursday morning. Economists surveyed by Bloomberg held a median forecast of a 6.5% rate. The print marked the fastest price growth since 1982 and a hefty uptick from the previous month's 6.3% rate, raising fresh concerns that the battle against inflation is worsening.

Shelter prices led the way, with the government's related index climbing 0.7% through the month. Housing counts for roughly one-third of the average household's spending and counts for an even larger slice of core inflation. While gas and food inflation has generally eased up from levels seen earlier in 2022, housing costs are taking their place.

Transportation services — which include airfares and mass transit — saw prices climb 1.9% last month, notching the largest one-month increase across core CPI components. Medical services followed with a 1% jump.

The broader headline CPI measure rose 8.2% in the year through September, according to the report, exceeding the projected 8.1% increase. The headline measure also rose 0.4% through the month of September alone, surpassing the average estimate of a 0.2% uptick. Month-over-month price growth is generally regarded as a more relevant inflation gauge, as it isn't influenced by where prices stood an entire year ago. Last month's gain is larger than the one that preceded it, and hints at new factors driving Americans' cost of living even higher.

The core index is viewed as a better tracker of underlying inflation pressures, since food and energy costs can whipsaw from month to month and blur the overall trend in consumer prices. Accelerating core inflation signals the Fed's rate hikes aren't yet weighing on overall price growth, and that it's more than gas and food prices that are keeping inflation elevated.

The Thursday report is a mixed bag for economists. The slight drop in headline inflation reveals that, to some extent, households could soon hope for some relief from the price surges experienced over the past year.

Yet rising core inflation underscores just how hard it will be for the US to put historic price growth behind it. The Fed has already raised interest rates into restrictive territory at the fastest pace in four decades, shifting monetary policy into a place where it will hit the brakes on economic growth. Officials have repeatedly signaled they will continue to hike rates into 2023 and beyond, and that such moves will bring economic pain in the form of weaker growth and higher unemployment.

Without some "softening" in the labor market, it's unlikely the central bank will be able to bring inflation to heel, Chair Powell said in September.

"If we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn't," he added.

Jobs data out last week all but confirmed the hiking cycle will continue well into next year. The US added 263,000 nonfarm payrolls in September, beating forecasts and surpassing the pre-pandemic pace yet again. The unemployment rate also fell to 3.5% from 3.7%, matching the five-decade lows seen before the health crisis. Though job gains have eased, the labor market remains red hot.

If the September jobs report opened the door to more larger-than-usual rate hikes, the latest CPI print blew it off its hinges. Prices are still ripping higher throughout the economy, and the Fed's battle against inflation is more serious than ever.