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Prices consumers pay for a wide variety of goods and services rose more than expected in September as inflation pressures continued to weigh on the U.S. economy.

The consumer price index increased 0.4% for the month, more than the 0.3% Dow Jones estimate, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s.

Excluding volatile food and energy prices, core CPI was even higher for the month, accelerating 0.6% against the Dow Jones estimate for a 0.4% increase. Core inflation was up 6.6% from a year ago, the biggest 12-month gain since August 1982.

The report initially rattled financial markets, with stock market futures plunging and Treasury yields moving up as traders priced in likely more aggressive interest rate hikes ahead from the Federal Reserve. However, those earlier losses reversed in morning trading, and the Dow Jones Industrial Average rose more than 800 points by 1:30 p.m. ET.

“The Federal Reserve has made it very clear they’re committed to price stability, they’re committed to reducing the inflationary pressures,” said Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute. “The more inflation comes in above expectations, the more they’re going to have to prove that commitment, which means higher interest rates and cooling in the underlying economy.”

Another large jump in food prices boosted the headline number. The food index rose 0.8% for the month, the same as August, and was up 11.2% from a year ago.

That increase helped offset a 2.1% decline in energy prices that included a 4.9% drop in gasoline. Energy prices have moved higher in October, with the price of regular gasoline at the pump nearly 20 cents higher than a month ago, according to AAA.

Closely watched shelter costs, which make up about one-third of CPI, rose 0.7% and are up 6.6% from a year ago. Transportation services also showed a big bump, increasing 1.9% on the month and 14.6% on an annual basis. Medical care services costs rose 1% in September.

The rising costs meant more bad news for workers, whose average hourly earnings declined 0.1% for the month on an inflation-adjusted basis and are off 3% from a year ago, according to a separate BLS release.

Inflation is rising despite aggressive Federal Reserve efforts to get price increases under control.

The central bank has raised benchmark interest rates 3 full percentage points since March. Thursday’s CPI data likely cements a fourth consecutive 0.75 percentage point hike when the Fed next meets Nov. 1-2, with traders assigning a 98% chance of that move.

The chances of a fifth straight hike three-quarter point hike also are rising, with futures pricing in a 62% probability following the inflation data.

Inflation rose despite pullbacks in some key areas that policymakers are watching.

For instance, used vehicle prices fell 1.1% and apparel posted a 0.3% decline. Egg prices even dropped, off 3.5% for the month though still up 30.5% from a year ago.

However, air fares rose after consecutive monthly declines, rising 0.8% for the month and up 42.9% from a year ago.

How much the higher prices have hurt consumers could be made clearer Friday, when the Commerce Department and Census Bureau release September’s retail sales report. The data, which is not adjusted for inflation, is expected to show a monthly increase of 0.3%, and no change when excluding auto sales.

Meyer, the Mastercard economist, said consumer spending remains solid despite the inflationary pressures.

“Inflation is able to run this hot in part because consumers have had very strong purchasing power,” she said. “Consumers are still spending through these inflation increases, and the challenge therefore is larger for the Fed to effectively be able to rebalance the economy.”

Falling housing prices eventually will work their way through to rents, which will lower the overall inflation numbers, Meyer added.

Consumer spending has held up in part because of leftover stimulus funds from Covid-related spending and a labor market that has been resilient even as the economy has slowed considerably. Nonfarm payrolls rose 263,000 in September and the unemployment rate fell to 3.5%, tied for the lowest since late-1969.

Jobless claims for the week ended Oct. 8 totaled 228,000, an increase of 9,000 from the week before, the Labor Department reported Thursday. That was just slightly ahead of the 225,000 estimate but still an indicator that layoffs are low.

Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.

The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared with the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.

Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago, the latter matching the August increase.

Food prices helped boost the increase in goods inflation, with a 1.2% monthly increase. Energy rose 0.7% after posting massive gains the previous two months.

Inflation has been the economy’s biggest issue over the past year as the cost of living is running near its highest level in more than 40 years.

The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.

“Inflationary momentum has built up in the U.S. economy and will persist near-term, keeping the Fed hiking aggressively,” said Bill Adams, chief economist for Comerica Bank.

However, Wednesday’s data shows the Fed still has work to do. Indeed, Cleveland Fed President Loretta Mester on Tuesday said “there has been no progress on inflation.” Following the PPI release, traders priced in an 81.3% chance of a three-quarter point hike, the same as a day ago.

Stock market futures trimmed gains following the news, while Treasury yields were little changed on the session.

The PPI release comes a day ahead of the more closely watched consumer price index. The two differ in that PPI measures the prices received at the wholesale level while CPI gauges the prices that consumers pay.

Some two-thirds of the increase in PPI was attributed to a 0.4% gain in services, the BLS said. A big contributor to that increase was a 6.4% jump in prices received for traveler accommodation services.

Final demand goods prices also rose 0.4% on the month, pushed by a 15.7% advance in the index for fresh and dry vegetables.

Inflation expectations and the outlook for household spending growth fell sharply in September as the Federal Reserve’s rate increases take hold in the U.S. economy.

Consumers expect the inflation rate a year from now to be 5.4%, the lowest number in a year and a decline from 5.75% in August, according to the latest New York Fed Survey of Consumer Expectations.

That level peaked at 6.8% in June and has been coming down since as the central bank has instituted a series of rate hikes totaling 3 percentage points. Markets largely expect the Fed to continue raising rates until it brings inflation down to its long-run target of 2%.

While the near-term outlook for inflation was improving, respondents also indicated that they see household spending growth of 6% for the next year, a steep fall from August’s 7.8% projection. That’s the lowest level since January and the biggest one-month decline ever in a data series going back to June 2013.

Consumers have been somewhat constrained by price increases moving near their fastest level in more than 40 years. Personal consumption expenditures in inflation-adjusted dollars rose just 0.1% in August while the rate of savings growth is declining, according to the Bureau of Economic Analysis.

Respondents did put a slightly higher number on their outlook for three-year inflation, moving that forecast to 2.9%, up 0.1 percentage point from August. Median five-year expectations rose to 2.2%, an increase of 0.2 percentage point but much closer to the Fed’s goal.

Elsewhere in the survey, respondents said they expect home prices to increase by just 2%, the lowest reading since June 2020 and reflective of a slowing real estate market. Consumers see gas prices rising by half a percentage point, and food to surge by 6.9%, a full percentage point increase from August’s survey.

The numbers come as the central bank is looking to arrest a cost-of-living surge pushed by Covid pandemic-related factors such as supply chain clogs. Unprecedented levels of fiscal and monetary stimulus also coincided with the inflation surge. The Fed has pulled back on its efforts, raising rates and beginning to reduce the size of the bond portfolio on its mammoth $8.8 trillion balance sheet.

Clarification: This story has been updated to clarify that the rate of savings growth is declining.