WASHINGTON–Although it was already expected to do so, the Federal Reserve is considered more likely to reduce rates when it meets this week following new Consumer Price Index numbers released by the Bureau of Labor Statistics that show inflation rose 3%.
While that is the fastest annual pace since the start of the year and a small increase over the prior month’s increase of 2.9%, so-called “core” inflation, which the Fed tracks as a gauge of underlying inflation since it strips out volatile items like energy and food prices, eased slightly to 3%, down from 3.1% in August.
The Good News’
“Both core and headline inflation grew at slower pace in September than they did in August,” said America’s Credit Unions Chief Economist Dawit Kebede in a statement. “The numbers also came in below consensus expectation. Core inflation, which excludes volatile energy and food prices, came down a bit on annual basis for the first time since March.
“The slower than expected price growth is good news for the Federal Reserve. It should help them continue cutting interest rates as the job market weakens,” Kebede added. “So far, the tariff impact has stayed modest and gradual. Credit unions remain trusted providers of affordable financial solutions for their members even in this high-cost environment.”
The Wild Card
The one wild card for the Fed remains employment, as that data is not being gathered by the federal government due to the shutdown. The CPI data was also a week late for the same reason, and was published because it is needed to set cost-of-living increases for Social Security.
August’s employment numbers were relatively weak, and weak employment data would likely give the Fed reason to further reduce rates.
The new CPI data reveal some tariff-sensitive categories posted outsize price rises in September: apparel jumped 0.7%, the sharpest month-over-month increase in a year, while furniture and bedding rose 0.9% and sporting goods increased 1% from August, according to the BLS.
Energy prices rose sharply month-over-month, led by a jump in gasoline. Food costs increased at a slower pace than in August.
Consumers Express Frustrations
Meanwhile, inflation remains top of mind for many Americans, according to survey data. The University of Michigan consumer-sentiment index fell to 53.6 in October from 55.1 in September, with respondents voicing frustration about ongoing high prices.
