A limited data release from the Bureau of Labor Statistics (BLS) revealed that the Consumer Price Index (CPI), a key gauge of what people pay for goods and services, rose less than anticipated in September.
This was the only official economic data released due to the government shutdown, made available because the Social Security Administration uses it for cost-of-living adjustments.
The overall CPI increased 0.3% for the month, putting the annual inflation rate at 3%. This was below the Dow Jones economists’ estimates of 0.4% and 3.1%, respectively. The annual rate saw a modest 0.1 percentage point uptick from August.
Excluding food and energy, the core CPI also showed a softer gain, rising 0.2% monthly and holding steady at an annual rate of 3%, both below expectations. The primary driver of the increase was a 4.1% jump in gasoline prices. Otherwise, inflation pressures appeared “fairly muted,” with shelter costs rising only 0.2% and food prices up 0.2%.
Market and Fed Implications
The report provided a crucial, albeit isolated, glimpse into the U.S. economy. Stock market futures added to gains following the release, while Treasury yields were slightly negative.
The CPI reading is the final significant data point the Federal Reserve will consider before its interest rate decision next week.
Markets are already pricing in a near-certainty that the central bank will lower its benchmark overnight borrowing rate by a quarter percentage point from its current 4%-4.25% target range, with another cut expected in December.
Despite achieving its 2% inflation goal only a couple of years ago, the Fed must now weigh the easing inflation against potential labor market weakness.
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