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US consumer prices rose 3.0% in September.

US consumer prices rose 3.0% in the twelve months leading up to September. This is faster than the previous month but lower than forecasts for a 3.1% increase. According to the official report, this trend will likely be closely watched by policymakers as they consider a possible Federal Reserve interest rate cut next week.

In August, the inflation indicator, delayed by 10 days due to the ongoing federal government shutdown, stood at 2.9%. Furloughed employees at the Bureau of Labor Statistics were temporarily recalled to calculate the consumer price index because the Social Security Administration had a November 1 deadline to release its annual benefit adjustments, which also account for changes in the cost of living.

On a monthly basis, this figure slowed to 0.3%, contrary to expectations of a 0.4% growth rate in August.
The Fed's core consumer price index (CPI), the key measure of inflation in the world's largest economy, stood at 3.0% annually and 0.2% monthly. Analysts had predicted readings of 3.1% and 0.3%, respectively, the same as in August.

Observers are wondering how President Donald Trump's trade policies, which have raised the effective tariff rate to an estimated 18%, the highest in nearly a century, will affect inflation. Many companies rushed to lock in orders before the tariffs were implemented earlier this year, providing them with inventory that allowed them to avoid some price increases. As these backlogs dwindle, it remains unclear whether businesses, eager to avoid scaring off customers, will raise prices.
Depending on the duration of the US government shutdown, Friday's inflation data may be one of the only indicators the Fed will use when assessing the trajectory of interest rates for the remainder of 2025.

Last month, the central bank lowered borrowing costs by 25 basis points, citing its decision to prioritize signs of slowing job growth over low inflation. However, due to the shutdown, members of the Federal Open Market Committee, which sets interest rates, will not receive the latest monthly labor market report and will instead turn to alternative sources, typically from private companies.
Still, markets anticipate the Fed will opt to cut interest rates by another quarter point at its two-day meeting starting next Tuesday, followed by another rate cut of the same magnitude at its final meeting of the year in December. According to the CME's FedWatch Tool, the likelihood of an October rate cut is almost certain following the release of the September consumer price index, while the probability of a December rate cut is over 96%.

Inflation data has given the central bank a "green light for a rate cut." The downward surprise in core CPI prices in September should further reassure the Fed of a rate cut next week.