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Used vehicles sit parked on the sales lot at a CarMax superstore on Sept. 24, 2020, in Colma, Calif.Justin Sullivan/Getty Images

U.S. consumer prices increased for a fourth straight month in September, with the cost of cars and trucks rising by the most since 1969, though inflation is slowing amid labor market slack as the economy gradually recovers from the COVID-19 recession.

While the benign report from the Labor Department on Tuesday will have no direct impact on monetary policy, it should allow the Federal Reserve to keep interest rates near zero for a while and continue with massive cash infusions as it nurses the economy back to health.

The U.S. central bank is now more concerned about the labor market and has embraced flexible average inflation targeting, which in theory could see policymakers tolerate price increases above its 2 per cent target for a period of perhaps several years to offset years in which inflation was lodged below its goal.

At least 25.5 million people are on unemployment benefits.

The consumer price index rose 0.2 per cent last month after gaining 0.4 per cent in August. The CPI advanced 0.6 per cent in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand.

A 6.7 per cent jump in the prices of used cars and trucks accounted for most of the increase in the CPI last month. That was the biggest gain since February 1969 and followed a 5.4 per cent advance in August. There were also increases in the costs of new vehicles and recreation. But prices for motor vehicle insurance, airline fares and apparel fell.

In the 12 months through September, the CPI increased 1.4 per cent after rising 1.3 per cent in August. Economists polled by Reuters had forecast the CPI climbing 0.2 per cent in September and rising 1.4 per cent year-on-year.

Excluding the volatile food and energy components, the CPI rose 0.2 per cent last month after increasing 0.4 per cent in August. In the 12 months through September, the core CPI gained 1.7 per cent, matching August’s increase.

The Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) price index rose 1.6 per cent in the 12 months through August. September’s core PCE price index data is scheduled to be released at the end of this month.

U.S. financial markets were little moved by the CPI data.

RENTS MUTED

Last month, gasoline prices edged up 0.1 per cent after rising 2.0 per cent in August. Food prices were unchanged after nudging up 0.1 per cent in August. The cost of food consumed at home fell 0.4 per cent, declining for a third straight month.

Housing inflation was muted last month as high unemployment makes it harder for landlords to raise rents. The pandemic has also fueled a migration to suburbs and other low-density areas from urban centers, which over time could result in higher vacancy rates for apartments and restrain rent growth.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, ticked up 0.1 per cent after a similar gain in August.

The cost of recreation rose 0.2 per cent last month after rebounding 0.7 per cent in August. Apparel prices decreased 0.5 per cent after rising for three consecutive months.

The cost of motor vehicle insurance declined 3.5 per cent and prices of airline fares dropped 2.0 per cent. Healthcare costs were unchanged after gaining 0.1 per cent in August.

Education costs fell 0.3 per cent after dropping by the same margin in August, which was the first decline since the series started in 1993. Many schools and universities have shifted to online classes because of the pandemic.

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