This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

More Worries For The Fed: Inflation Powers Through September

Last week the Bureau of Labor Statistics (BLS) announced that inflation had flared up for the second consecutive month. From average Americans with savings accounts to Ben Bernanke and the Fed, rising prices could change how people look at their financial responsibilities.

The BLS found that the Consumer Price Index rose by 0.6 percent in September, the second consecutive monthly increase by that amount. Over the past year, inflation is still just a mild 2.0 percent, but considering that more than half of that increase occurred in the last two months, it is the recent acceleration of inflation that is worrisome.

The potential effects of inflation

Here are four things to note on rising inflation:

  1. Wiping out a year of interest on savings accounts. If 0.6 percent doesn't sound like much inflation, keep in mind that this is just one month's increase. If inflation continued at that rate for a year it would amount to more than 7 percent. To look at it another way, September's inflation alone was enough to wipe out the value of a full year's worth of interest on most savings accounts. Taken together, August's and September's inflation were enough to wipe out the value of a year's worth of interest on even the highest-yielding savings accounts.
  2. More than an aberration? Any given month's inflation number can be dismissed as an aberration, but on the heels of an identical increase in August, September's inflation takes on greater significance. Once may be an aberration, but twice starts to look like a pattern. October's inflation number will show whether this has the makings of a trend.
  3. Don't blame the Middle East. As was the case in August, higher gasoline prices were the driving force behind September's inflation. It's customary to expect that higher gas prices were driven by a rise in crude oil prices, but that was not the case in September. Crude oil prices actually leveled off during the month, while retail gas prices continued to rise. It seems it was more domestic supply-and-demand issues rather than crude oil prices that drove gasoline higher this time around. The good news is that so far in October, both oil and gasoline prices seem to have flattened.
  4. Gives them something to talk about. The resurgence of inflation should make for a lively discussion at next week's Fed meeting. If inflation looks threatening, the Fed may have to back off from its low interest rate policies a little bit. Recent improvement in unemployment actually gives them a little latitude to do that. Given the chronic weakness of the job market, it's unlikely the Fed will adjust course just yet, but between the latest job and inflation numbers, it suddenly has a changing set of conditions to take into account.

Between the presidential debates and the World Series, the high inflation number received relatively little press this week, but that may be one more reason to worry. It's generally the economic problems people don't see coming that hurt the most.


Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs