US consumer prices rose more slowly than expected in September, reinforcing expectations that the Federal Reserve will cut interest rates again next week. CPI rose 0.3% month-on-month and 3.0% year-on-year, while core CPI rose 0.2% and 3.0% respectively.
The modest increase came as the Fed reassessed price pressures amid the federal government shutdown that has disrupted the release of official economic data. The CPI report is being released specifically to help the Social Security Administration calculate the cost-of-living adjustment for 2026.
Economists say the impact of the new import tariffs on inflation is still slow as companies adjust old stocks and absorb some of the taxes. However, inventories are dwindling, and major retailers such as Walmart are already seeing higher costs as they replenish stocks at the new post-tariff prices.
The Fed is expected to cut interest rates by 25 basis points to a range of 3.75%-4.00% next week. But analysts have warned that October's inflation data could be incomplete because more than half of the data collection has not been completed due to the government shutdown.
The shutdown adds to the pressure on the Bureau of Labor Statistics, which is already facing a shortage of resources and staff, similar to the 2013 crisis when only 75% of CPI data was collected. Analysts expect the disruption could affect the clarity of inflation by the end of the year.
