SURPRISE
Inflation In Sept. Highest Since '80
Federal Benefits To Rise Up to 4.1%
By Nell Henderson
Washington Post Staff Writer
Saturday, October 15, 2005; Page A01
Hurricanes Katrina and Rita helped make energy prices soar in September at the fastest rate on record, contributing to the highest monthly consumer price inflation in 25 years, the government reported yesterday.
The inflation spike means payments to millions of Americans receiving Social Security and other federal benefits will rise next year by the largest amount since 1991, because of automatic cost-of-living adjustments.
However, average wages for most workers have risen more slowly than prices over the past 12 months, leaving workers with less spending power than a year earlier.
Energy prices have eased a bit this month and other prices show no sign of breaking out of control, analysts said. The worst monthly inflation increase in a generation does not signal a return to the economic turbulence of the 1970s and early '80s, with double-digit inflation and interest rates. Global competition and a vigilant Federal Reserve should prevent that, they said.
But consumers will probably have to live with higher prices and rising interest rates for months to come. That mixture, at a time when household debt is high and savings are low, is already slowing economic growth, several analysts said.