The 18.4 percent decline in the energy index over the past year offset increases in the indexes for food (up 1.6 percent) and all items less food and energy (up 1.9 percent).
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The CPI growth rate tends to run higher than the Fed’s preferred inflation measure, the personal consumption expenditures price index, economists say.
Federal Reserve officials are looking for evidence of firming inflation before they raise interest rates from near zero, where they have held since 2008.
That exceeded forecasts for an increase of 0.2 percent and was down from 0.4 percent in the three months prior. Higher housing-related prices, and seasonally higher vegetable and package holiday prices, were partly countered by lower vehicle relicensing fees.
Economists polled by Reuters had forecast the CPI falling 0.2 percent in September and dipping 0.1 percent from a year ago.
Following the decline in wholesale energy prices in recent months, gasoline and other energy prices were a drag on headline CPI.
But even core price gains, which the Fed monitors more closely, have fallen short of its 2% annual target, in part because a strong dollar that’s holding down import prices. Keep in mind, however, that rising housing costs do not necessarily reflect widespread inflation pressures but rather sector specific price adjustments as a result of tight inventory levels; isolated, sector-specific price pressures are unlikely to feed through into the broad economy. That gauge historically shows annual inflation running about half a percentage point lower than the CPI. Excluding the volatile food and energy categories, so-called core prices were down 0.3%.
The Fed was on the fence about raising its key interest rate in September and finally decided against it.
The dollar also found a defender in New York Federal Reserve president William Dudley, who said today that a rate rise in 2015 remains likely and downplayed any disagreement within the Federal Open Market Committee.
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From a year earlier, real average weekly earnings are up 2.2 per cent.
