U.S. Inflation Rises 3.0% in September, Slightly Below Forecasts
U.S. consumer prices increased by 3.0% year-over-year in September, rising slightly faster than August’s pace but coming in below economists’ expectations of a 3.1% gain. The data, closely watched by the Federal Reserve, could shape the central bank’s next move on interest rates.
The report, delayed by ten days due to the federal government shutdown, was published after Bureau of Labor Statistics employees were temporarily recalled. Officials needed the data to help the Social Security Administration calculate its annual cost-of-living adjustment before the November 1 deadline.
Inflation Slows Slightly Month to Month
On a monthly basis, prices rose 0.3%, easing from August’s 0.4% increase. The core CPI—which excludes food and energy and is the Fed’s preferred inflation gauge—also climbed 3.0% year-over-year and 0.2% month-over-month, both softer than the 3.1% and 0.3% forecasts.
Analysts at Vital Knowledge said prices rose in tariff-sensitive categories like apparel, footwear, furniture, and toys. Hotel and airfare costs also increased, but shelter prices cooled and food expenses declined.
Trade Policy Impact Remains Unclear
Observers continue to watch how President Donald Trump’s trade policies—which have lifted effective U.S. tariff rates to around 18%, the highest in nearly a century—will influence inflation. Many firms stockpiled goods earlier in the year to avoid higher costs, but as inventories shrink, some may eventually pass price increases to consumers.
“The big wildcard remains tariff-linked inflation,” analysts said. “It’s uncertain whether this is a short-lived spike or a longer-term trend that keeps prices elevated into next year.”
Fed Rate Cut Expectations Strengthen
With limited data available due to the shutdown, this CPI report may be one of the few key indicators guiding the Federal Reserve’s policy meeting next week. The Fed cut rates by 25 basis points last month, prioritizing slowing employment growth over lingering inflation.
Markets now expect another quarter-point cut at the upcoming two-day meeting, followed by one more in December. According to CME’s FedWatch Tool, the probability of an October rate cut is near 100%, while odds for a December reduction exceed 96%.
Stephen Brown, Deputy Chief North America Economist at Capital Economics, said the softer inflation data gives the Fed “the green light to cut,” adding that the downside surprise in core CPI should reinforce policymakers’ confidence in easing rates.
Lower rates could help stimulate investment and job creation, but aggressive cuts also carry the risk of reigniting inflationary pressures. Following the CPI release, U.S. stock futures climbed, while Treasury yields—which move inversely to prices—edged lower across the curve.
