Inflation Report: CPI Increased 3% in September, Just Below Forecast

The year-over-year inflation rate heated up to 3.0% in September, back to where it stood in January.

Economists expected last month’s rate to be 3.1% after an uptick to 2.9% in August.

Core CPI, which excludes volatile food and energy prices, also increased 3% over the year in September. It was also expected to be 3.1%, which would have matched rates in July and August.

Core CPI increased 0.2% over the month between August and September, short of the 0.3% forecast that would have matched July and August’s rates.

CPI increased 0.3% over the month between August and September, below the 0.4% forecast and the previous rate.

The Bureau of Labor Statistics was supposed to publish September’s consumer price index report on October 15, but the release was delayed when the government shut down on October 1. The shutdown, which is now the second-longest in US history, has affected the compensation and employment of many federal workers and some agencies’ operations.

“The delayed September CPI print showed slight stubbornness, primarily driven by goods inflation, with services inflation indicating signs of moderating,” Ryan Weldon, investment director and portfolio manager at IFM Investors, said.

BLS said the price of gas was the biggest factor in the monthly rise. That rose 4.1% over the month, way above the previous 1.9% increase. However, the gas index fell 0.5% over the year.

The food index rose 3.1% year over year. It rose 0.2% over the month, less than the previous 0.5% increase. Beef and veal prices rose 1.2% over the month but 14.7% over the year, the largest year-over-year rise since March 2022.

The BLS’s jobs report wasn’t published earlier this month due to the shutdown and hasn’t been rescheduled. The Fed is meeting on October 28 and October 29 to discuss rates, and given the lack of official data, they may use private data releases and previous jobs reports to understand how the labor market has been performing.

“In our view, the Fed is increasingly focused on supporting the labor market, especially as inflation risks appear transitory and tariff-driven,” a note from global financial services company Raymond James before the latest CPI report said.

Large companies and small businesses have been figuring out whether to increase prices, reduce head count, and make other business changes due to tariffs and economic uncertainty.

While the full picture of the job market remains murky, today’s CPI report at least gives Fed members some insight into prices. The Social Security Administration will also be able to use the fresh inflation figures to calculate and announce the annual cost-of-living adjustment for benefits.

The Fed cut rates for the first time this year in September, providing some relief to Americans’ wallets, and is expected to make another rate cut. CME FedWatch showed an overwhelming probability of a 25-basis-point cut next week and a slim chance that the range will be held steady.

With inflation ticking up less than expected and a soft job market, the Fed will likely cut rates again.

“This will be framed as an insurance cut, with hopes that by December the shutdown is over and the Fed has a clearer read on jobs,” Olu Sonola, the head of US economic research at Fitch Ratings, said.

Median inflation expectations for one year ahead increased for the third straight time in a New York Fed survey, rising from 3.2% in August to 3.4% in September.