U.S. core inflation slowed in September, rising just 0.2% from August, the weakest pace in three months, signaling continued cooling of price pressures and reinforcing expectations that the Federal Reserve will cut interest rates next week. The moderation was driven by the smallest increase in housing costs since early 2021 and softer goods prices, including cheaper used cars. Headline CPI rose 0.3% month-over-month and 3% year-over-year, both slightly below forecasts. The report, delayed by the ongoing federal government shutdown, allowed the Social Security Administration to finalize a 2.8% cost-of-living increase for 2026, according to Mark Niquette of Bloomberg. Markets rallied on the news, with stock futures up and Treasury yields down, as investors priced in another possible rate cut in December. He writes:
Underlying US inflation rose in September at the slowest pace in three months, keeping the Federal Reserve on course to lower interest rates next week.
The core consumer price index, excluding the often volatile food and energy categories, increased 0.2% from August, according to Bureau of Labor Statistics data out Friday. That was restrained by the smallest increase in a key measure of housing costs since early 2021.
The September CPI report was initially scheduled to come out on Oct. 15 but was delayed because of the ongoing federal government shutdown. While most BLS operations have ceased since the Oct. 1 closure, the agency recalled staff to prepare this release so the Social Security Administration could tally its annual cost-of-living adjustment, which will total 2.8% for next year. […]
Stock futures climbed while Treasury yields and the dollar fell after the report. Investors boosted bets that the Fed will cut rates again in December.[…]
“All active data collection activities are paused while the government is shut down. Once funding is restored, BLS will resume normal operations and notify the public of any changes to the news release schedule on the BLS release calendar,” a BLS spokesperson said in an emailed comment.
In a separate report, the Social Security Administration said on average, Social Security benefits will increase by $56 to $2,071 per month starting in January.
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