Core inflation, which strips the volatile food and energy sectors, advanced to a 6.6 percent annual rate, a new four-decade high. This was up from 6.3 percent in August and higher than the market forecast of 6.5 percent.
On a monthly basis, the consumer price index (CPI) rose 0.4 percent, while the core CPI surged 0.6 percent.
The major contributors to September inflation were increases in the shelter, food, and medical care costs.
According to BLS data, a sustained rise in food costs continues to inflate the headline figure. The food index gained 0.8 percent in September, the same as in August, and was up 11.2 percent year on year.
The shelter index, which is closely watched, went up by 0.7 percent in September, which was also the same as in August. The rent index rose 0.8 percent in September and 6.7 percent year-over-year.
And the medical care costs rose 1 percent last month, after rising 0.8 percent in August.
Investors have been keeping a close eye on inflation readings as they might offer hints on whether the U.S. central bank could pivot on monetary policy.
With inflation at these levels, some investors are concerned about the Federal Reserve's ability to control surging prices.
Speaking at the Institute of International Finance’s annual membership meeting on Oct. 12, Larry Fink, chairman and CEO of BlackRock, warned that the central banks around the world have to use “a hammer more frequently.”
“We had in the United States in 2022 $1.1 trillion of fiscal stimulus,” he noted.
“Because of these fiscal policies, it forces the central banks to use a hammer more frequently, because it's going to be harder to arrest that inflation.”
The latest consumer prices data come after wholesale prices were higher than what economists had anticipated.
U.S. consumers anticipate prices to rise faster for gasoline, college education, food, and rent.
"Participants observed that, as the stance of monetary policy tightened further, it would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation," the minutes stated.
Indeed, after the Reserve Bank of Australia (RBA) raised the benchmark policy rate by just 25 basis points, and the Bank of England (BoE) temporarily reversed course and purchased government bonds, investors are hopeful that the Fed could follow this route.
So far, there is no indication that the Fed has started reconsidering its quantitative tightening cycle.
"If the economy entered a steep downturn, we could always stop what we’re doing. We could always—if we needed to—reverse what we’re doing, if we thought that inflation was headed back down very, very quickly," he said. "For me, the bar for such a change is very high because we have not yet seen much evidence that the underlying inflation—the services inflation, the wage inflation, the labor market—that that is yet softening."