WASHINGTON (Reuters] – U.S. consumer inflation rose strongly in September, and is expected to increase further over the next few months. The rise in prices for energy products would also raise doubts about the Federal Reserve’s assertion that the high rate of inflation in America is temporary.

Labor Department reported Wednesday that the consumer price index increased 0.4% after increasing 0.3% in August. After a 5.3% increase in August, the CPI rose 5.4% over the 12-month period to September.

The CPI rose 0.2% in September, after increasing 0.1% in August. This is the lowest gain in six month. Core CPI increased 4.0% per year after rising 4.0% in August.

Reuters polled economists and they forecasted that the CPI would rise 0.3% overall, while core CPI will increase 0.2%.

On Monday, oil prices surged to new highs due to increased global demand for the product after the COVID-19 epidemic. Even though futures dropped on Wednesday, oil prices remain above $80 per barrel. The prices of oil have also increased.

The cost of energy products could accelerate wage growth and increase inflation pressure. According to the government, September’s average hourly earnings increased 7.5% in the past year due to worker shortages.

The number of individuals quitting their job involuntarily has reached a new record and there are at least 10.4 millions unfilled posts. Wage inflation is expected to continue rising.

Jerome Powell, Fed Chair has said repeatedly that inflation is temporary. He blamed the bottlenecks in supply chains for this high level of inflation. Nearly two decades after the outbreak, there is no indication that supply chains have slowed down.

This has resulted in a shortage of motor vehicles and higher consumer prices.

Andrew Hollenhorst is chief economist at. Citigroup New York: (NYSE:)

Higher energy prices could be a trigger for broader inflation if businesses are confident they can pass on the input cost.

The Fed will not be affected by September’s CPI data. It won’t have any impact on its timeline for scaling down its huge monthly bond-buying program. Last month, the U.S. central banking indicated that it may begin to taper its asset purchases in November.

The Economists anticipate that the announcement will be made at the Nov. 2 and 3 policy meetings.

Ryan Sweet, a Senior Economist at Moody’s Analytics in West Chester (NYSE) said, “The central bank already stated that inflation has reached the threshold for tapering,”. CPI might cause some reaction in bond markets as it may alter market expectations regarding the timing for Fed rate increases. However, we believe that this could be a temporary response.

Core personal consumption expenditures price index is the Fed’s preferred inflation measurement for meeting its flexible target of 2%. It rose 3.6% over the past 12 months to August and rose by the same margin in September. Later this month, September’s data is expected to be available.

Last month, the Fed raised its core inflation forecast for PCE to 3.7% (from 3.0% in June).

Even with strong wage gains high inflation has a negative impact on consumers purchasing power.

This, along with a shortage of motor vehicles, has led economists cut their third-quarter gross domestic product estimates to as low a 1.3% annualized pace from a 7% pace. On Tuesday, the International Monetary Fund lowered its U.S. growth projections for 2021 by one percentage point to 6.0% (from 7.0% in July).