Surging energy, housing and food costs propelled inflation in September to an annual rate of 5.4%, an increase from August's 5.3%, the Bureau of Labor Statistics reported on Wednesday.
The rise comes after a 0.3% monthly gain in August and a 0.5% increase in July. The monthly increase for September was 0.4%.
Excluding food and energy, which are often volatile, prices rose 0.2% in September, up from 0.1% in August, and unchanged at 4% for the year.
Rising prices are being exacerbated by shortages of materials and labor, forcing consumers to pay more at the gas pump and the checkout counter. While the Federal Reserve Board has said the increases are "transitory" as a result of the pandemic, Fed Chairman Jerome Powell recently acknowledged they may last longer than officials originally thought.
The Fed has said it will begin dialing back its $120-billion-per-month purchases of Treasuries and mortgage-backed securities, which many analysts believe will begin after the Fed's November meeting. An increase in interest rates from their current historically low levels is unlikely before next year, however.
That may not be soon enough for the markets, which have begun to behave with more volatility in recent weeks. Yields on the 10-year Treasury, for example, have risen above 1.5% in recent days.
"We continue to think the inflationary pressures we're seeing will be temporary (transitory) and will likely subside over the course of 2022," LPL Financial Fixed Income Strategist Lawrence Gillum said Tuesday. "The structural headwinds in place before the pandemic remain (technology, globalization, and demographics in particular) and supply chain challenges will work themselves out over time. However, in the near term, higher inflation expectations may continue to weigh on bond prices. Once those inflation concerns pass though, we could see a better environment for fixed income."
A large contributor to rising prices has been the soaring cost of energy, with the price of a barrel of oil now trading above $80, twice that of a year ago when many producers cut their output in the face of a global economy ravaged by the coronavirus. A series of tropical storms in the United States further impeded production as drivers began hitting the roads again this summer.
Disruptions in the global supply chains have also added to pricing pressures, with dozens of container ships sitting off the California coast unable to dock and release their cargoes due to labor shortages at the docks. President Joe Biden is expected on Wednesday to announce a plan to keep the ports of Long Beach and Los Angeles open around the clock to ease the congestion, while shippers FedEx, UPS and Walmart are also planning extended operations.
The combination of rising prices and the recent increase in cases tied to the delta variant of the coronavirus and resulting restrictions on business and social activities have dampened the mood of consumers.
A recent study by The Allianz Life Insurance Co. of North America found that 78% of Americans expect inflation to get worse over the next year, and 69% say it will negatively impact their purchasing power over the coming months.
"People were feeling better about market risks to their retirement this summer when we saw that brief return to normalcy before getting a Delta-driven reality check," said Kelly LaVigne, vice president of consumer insights at Allianz Life. "Now, nearly seven in 10 (69%) say they are worried that the increase in COVID infections will cause another recession."