Surprise lift in rents pushes US inflation higher

The news: US consumer prices increased in September amid a surprise surge in rental costs that helped boost bond yields and renewed worries over the path for interest rates.

The numbers: The consumer price index increased 0.4% last month, with a 0.6% jump in the cost of shelter accounting for more than half of the rise. That was the largest rise since February and followed a 0.4% gain in August. Economists had forecast the CPI would gain 0.3% in September.

The context: The jump in rents is at odds with the rising supply of multi-family housing and independent surveys showing asking rents declining, but economists expect the gains to reverse in the coming months. However, with the US labour market still tight, reaching the Federal reserve’s 2% inflation target could be a long slog, making it likely that the central bank could keep interest rates elevated for longer. The data prompted a decline for major stocks indices on Wall Street.