U.S. Consumer Prices Rose 0.3% in September

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U.S. Consumer Prices Rose a Steady 0.3%

WASHINGTON—U.S. consumer prices increased steadily in September, a sign of slowly building inflation that could nudge the Federal Reserve closer toward raising interest rates.

The consumer-price index, measuring what Americans pay for everything from dental care to cars, rose 0.3% from a month earlier, the Labor Department said Tuesday. Excluding the volatile costs of food and energy, so-called core prices climbed 0.1%.

Overall prices have risen 1.5% over the past year, a sluggish pace historically but still the biggest gain in any 12- month period since October 2014, driven largely by rent and health care cost increases. Core prices rose 2.2% over the period.

"We are just beginning to see the first whiffs of upward pressure in prices as labor and product markets tighten," economist Stephen Stanley of Amherst Pierpont said in a note to clients.

The government will use data from Tuesday's report to determine how much to increase federal benefits for millions of Americans who receive Social Security checks. Benefits will rise 0.3% next year, under an annual cost-of-living adjustment that is tied to how much certain prices grew in July through September, the Social Security Administration said.

Consumer prices have grown in six of the past seven months. Higher oil prices are driving the latest growth. Energy prices climbed 2.9% since August--driven by higher gasoline costs--but were still down by 2.9% compared with a year earlier.

Food prices were flat from August and fell 0.3% from a year earlier.

The data is likely to reassure the Fed that the economy remains stable and inflation is picking up from historically weak levels. The Fed has set a long-term goal of 2% annual price growth-as measured by a separate gauge, the price index for personal-consumption expenditures, produced by the Commerce Department-as it tries to steer the economy toward healthy growth that won't lead to crippling inflation.

That price-growth index shows overall prices rose 1% in the year through August while core prices climbed 1.7%. Inflation has remained below the Fed's target for more than four years, but a range of indexes suggest some momentum this year.

The Fed is expected to hold off on raising interest rates at its policy meeting in early November, but has indicated it could raise rates slightly in December.

Separately Tuesday, data showed that workers' earnings grew sluggishly last month. Americans' average weekly earnings, after accounting for inflation, grew 0.2% in September from a month earlier. Their inflation-adjusted hourly earnings fell, but the hours that they worked—the average workweek—increased.

Write to Josh Mitchell at joshua.mitchell@wsj.com

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