The US consumer price index (CPI) rose 0.3% in September from the previous month, bringing the annual inflation rate to 3%, the Labor Department said on Friday.
The reading came in marginally below economists’ expectations of a 0.4% monthly gain and a 3.1% annual increase, according to a Dow Jones survey.
Excluding volatile food and energy prices, the so-called core CPI advanced 0.2% on the month and 3% on a yearly basis, also undershooting estimates.
Economists forecasted growth of 0.3% and 3.1%.
The figures pointed to a continued moderation in price pressures, even as the overall pace of inflation edged up from August’s 2.9% reading.
The White House also said that the government might not be able to release the inflation data for October due to the ongoing government shutdown.
Energy costs drive headline increase
Energy prices were the biggest contributor to September’s increase, with the gasoline index jumping 4.1% and overall energy costs rising 1.5% for the month.
Food prices increased modestly, with the food-at-home index up 0.3% and food-away-from-home prices inching up 0.1%.
Meanwhile, core components such as shelter, airline fares, recreation, and apparel continued to climb, while declines were recorded in motor vehicle insurance, used cars and trucks, and communication costs.
On an annual basis, the energy index rose 2.8% and the food index climbed 3.1%, while the core inflation rate — excluding food and energy — matched the headline figure at 3%.
Markets cheer softer inflation data
The slightly softer-than-expected report boosted market optimism that the Federal Reserve could proceed with rate cuts before the end of the year.
With the federal government shutdown now in its 24th day, traders are relying heavily on CPI and other limited data to gauge the Fed’s next move.
“There was little in today’s benign CPI report to “spook” the Fed and we continue to expect further easing at next week’s Fed meeting,” said Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management.
“A December rate cut also remains likely with the current data drought providing the Fed with little reason to deviate from the path set out in the dot plot.”
Following the data release, US equity futures extended gains.
Futures tied to the Dow Jones Industrial Average rose 232 points, or 0.5%, while S&P 500 futures gained 0.7% and Nasdaq 100 futures advanced 0.9%.
Bitcoin also surged, trading at around $111,600 after the report’s release.
Outlook
The September inflation reading adds to a growing body of evidence suggesting that price pressures are easing, even if progress remains uneven.
Economists say the report gives the Federal Reserve additional room to maintain its gradual approach to policy easing.
While the slight uptick in the annual CPI rate may temper hopes of an immediate return to the Fed’s 2% target, most analysts view the trend as consistent with a soft landing scenario, where inflation cools without triggering a sharp slowdown in growth.
Shutdown to halt next inflation data release
The White House said on Friday that the US government will likely be unable to release October’s inflation data due to the ongoing government shutdown, which has now entered its fourth week.
The funding lapse has forced surveyors to stay off the field, “depriving us of critical data,” according to a statement posted on X by the White House.
It would make it the first instance in history where the inflation figures will not be published, White House added.
The absence of this key economic indicator could affect policymakers, investors, and businesses that rely on the data to assess price trends and make financial decisions.
The prolonged shutdown has led President Donald Trump’s administration to furlough large numbers of federal employees, including staff at agencies responsible for collecting and analyzing economic data.
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