On an annual basis, inflation stood at 3.0%, compared with 2.9% in August. Both readings came in just below market expectations of 0.4% month-on-month and 3.1% year-on-year. The increase was largely driven by a 4.1% jump in gasoline prices.
When excluding food and energy—categories known for volatility—the core CPI rose 0.2% in September, with the annual rate holding at 3.0%.A significant slowdown in rental inflation helped keep core inflation contained, signaling some cooling in the housing sector.
However, the ongoing US government shutdown has disrupted federal data collection efforts.
As a result, the October CPI report may not be published, an unprecedented possibility. The lack of fresh data could complicate the Fed’s ability to gauge price trends and may add to financial market uncertainty.
It makes September’s inflation reading particularly important ahead of the Federal Reserve’s policy meeting. Markets now see a strong likelihood of interest-rate cuts moving forward.
According to the CME FedWatch Tool, there is about a 97% probability that the policy rate will fall from the current 4.00%–4.25% range to 3.50%–3.75% by the end of the year.
A 25-basis-point cut next week is widely expected, with the possibility of additional easing later in the year as the Fed tries to balance slowing price pressures with signs of a weakening labour market.
Following the softer inflation data, US stocks opened higher, the dollar weakened slightly, and longer-term Treasury yields moved up, reflecting expectations of looser monetary policy ahead.
