In this morning’s data, the Consumer Price Index (CPI) increased 0.3% in September, slightly less than expected and less than the previous month’s increase. On an annual basis it grew 3.0%, also less than expected but one tenth higher than the previous month. The core rate, which excludes prices for food and energy, increased 0.2% in September, less than expected and one tenth lower than last month’s increase. It grew 3.0% on an annual basis.
Looking at the individual categories for the CPI, monthly prices for Gasoline, up 4.1%, were relatively strong while monthly prices for Utility (piped gas) services, down -1.2%, and Used Cars and Trucks, down -0.4%, were relatively weak. Prices for Shelter were up 0.2%, two tenths lower than the previous month.
Overall, a decent report as both the headline and core CPI measures increased less than expected in September. Still, annual levels remain around 3%, well above the Federal Reserve’s stated 2% target for core rates. While gasoline prices increased in the month, prices for used cars and trucks declined and Shelter costs increased less than the previous month.
At the latest meeting, the Federal Reserve decreased interest rates taking the position to focus primarily on the labor market weakening in 2025 instead of inflation. While additional rate decreases are expected in the months ahead, it is important to remember that annual rates for core inflation remain above their 2% target. With limited economic data releases in the government shutdown, how the Fed decides to view these inflation levels versus the labor market will be key for the economy in the months ahead.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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