Washington (AFP) – US consumer inflation continued to heat up last month, but by less than expected, according to official data published Friday, nine days late because of the ongoing government shutdown. However, the acceleration is unlikely to dim expectations of another rate cut from the Federal Reserve next week as it looks to support the flagging labor market. The consumer price index (CPI) picked up to 3.0 percent in September, accelerating from 2.9 percent on a year-on-year basis a month earlier, the Labor Department said in a statement. Prices rose 0.3 percent from a month earlier. Both the annual and monthly inflation data came in slightly below the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.
A significant reason for the monthly increase came from the gasoline index, which jumped 4.1 percent between August and September. The food index rose by a more modest 0.2 percent. Underlying so-called “core” inflation, excluding volatile food and gas prices, also came in below expectations at 3.0 percent, the Labor Department said. “It certainly is welcome news that we had a surprise on the downside, with shelter costs really helping us out,” KPMG chief economist Diane Swonk told AFP, referring to the accommodation data in the latest inflation print. But, she warned, goods inflation has now increased for four months in a row, adding that service sector inflation remained “somewhat sticky.”
The data provides economists and traders with some much-needed insight into the health of the world’s largest economy, with almost all other official data releases halted due to the US government shutdown, now in its 24th day. Policymakers on Capitol Hill remain in a standoff, with Republicans so far digging in and refusing to grant the Democrats’ demands to extend subsidies that make health insurance affordable for millions of Americans. White House press secretary Karoline Leavitt praised President Donald Trump’s agenda for the “below market expectations” CPI data and blamed the Democrats for the shutdown — accusations that they have repeatedly rejected.
The shutdown “will likely result in no October inflation report, which will leave businesses, markets, families, and the Federal Reserve in disarray,” she said in a statement. But Senate Democratic leader Chuck Schumer blamed Trump for the recent rise in inflation, referring to his decision to roll out sweeping tariffs earlier this year. “This is just the latest warning sign that Donald Trump continues to squeeze the life out of working people in our economy,” he said in a statement. The CPI data published Friday is an exception to the ongoing pause in the release of official data, and was released to allow the US Social Security Administration to calculate its cost-of-living adjustment for 2026.
Rate cut widely expected – Policymakers at the US central bank are widely expected to cut rates by another 25 basis points next week, despite the September acceleration in inflation. The move would build on the bank’s decision to implement its first rate cut of the year in September. That’s because policymakers, who have a dual mandate from Congress to tackle inflation and unemployment, are flagging concerns about the sharp slowdown in job creation in recent months. US job growth for August came in at just 22,000. The Labor Department has not published the September figures due to the shutdown.
Futures traders see a 97 percent chance that the Fed will announce a quarter-point cut on Wednesday, lowering its benchmark lending rate to between 3.75 and 4.00 percent, according to CME Group data. “A slower-than-expected inflation reading is a welcome sign and should lock the FOMC into a 25 bps (basis points) rate cut next week,” economists at Wells Fargo wrote in a note to clients.
© 2024 AFP
