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- September CPI came in less than expected, giving markets confidence that the Fed could cut rates by 25 basis points in their next meeting.
- Energy costs led gains in inflation, while slower increases in rent, travel and vehicles helped reduce inflationary pressures.
- The ongoing government shutdown delayed economic data release, halting data collection and complicating the Fed’s plans.
September CPI in the US was released last week after a delay from the ongoing government shutdown. The numbers turned out less than expected, giving Wall Street an optimistic push ahead of the Federal Reserve’s two-day policy meeting next week.
Report Breakdown
Headline CPI came in lower at 0.3% MoM, missing its forecast of 0.4%. The annual rate came in at 3%, also below its forecast of 3.1% but still higher than August’s figure. Core CPI also missed estimates, coming in at 0.2% MoM and 3% YoY. ⁽¹⁾
Main Contributors to Price Changes
Gasoline prices jumped 4.1%, making it the biggest contributor to the overall rise, as energy prices increased 2.8% YoY. Electricity prices rose 5.1%, and natural gas increased 11.7%. ⁽²⁾
Food prices also contributed to the rise, increasing 0.2% MoM and 3.1% YoY. Beverages rose 5.3%. Other increases included apparel at 0.7% and durable goods at 0.3%. Tariffs raised prices for apparel, appliances, furniture, bedding and sporting goods. ⁽³⁾
Slower increases in hotel rates, flights, rents, and the cost of used automobiles and trucks helped reduce inflationary pressures, while tariff impacts remained minimal so far. ⁽⁴⁾
Market Reaction
Stocks reached record highs, with the Nasdaq 100 closing at 25,365 and the Dow Jones closed above 47,000. Meanwhile, the S&P 500 rose above 6,800.
The US dollar index remained steady, but its rally was stalled following the soft inflation report. Gold removed some losses but remained pressured below $4,100 per ounce.
Government Shutdown and Data Release
The CPI report has been the only official data released during the shutdown. It came out to allow the Social Security Administration to calculate 2026 cost-of-living adjustments. The report was originally due on October 15 but was delayed as the shutdown stopped most data collection. The White House said there may be no October inflation report for the first time ever. ⁽⁵⁾
This could risk economic issues and complicate the Federal Reserve’s plans. Over two-thirds of October’s data remains uncollected. In comparison, only 75% of October’s data was collected during the 2013 government shutdown.
Budget cuts already limit some CPI data gathering. Former BLS Commissioner Erica Groshen said that time is running out for the October report. The shutdown continues to raise worries about future data quality. ⁽⁶⁾
Federal Reserve Implications
This is the last major data before the Fed’s rate decision, which is due on Wednesday. Markets expect a 25 basis point rate cut in the upcoming meeting and another cut in December, but the path for monetary policy in 2026 remains unclear. Fed Chair Jerome Powell remains cautious on cuts, as the Fed is trying to maintain its dual mandate of price stability and maximum employment.
The Fed uses PCE indexes for its target. Based on CPI, the core PCE is likely to rise 0.2% monthly and 2.9% annually. However, the ongoing shutdown will delay the release of that data.
The second-longest shutdown in history is raising worries over the quality of future inflation reports, given the suspension of collection efforts. President Trump said that inflation has gone and is now pushing for big cuts. But tariffs could still spark more inflation. ⁽⁷⁾
