U.S. September CPI Slightly Below Expectations, Fed Rate Cut Prospects Brighten Ahead of Next Week

October 24th: The increase in the U.S. September CPI was a bit lower than anticipated, creating the conditions for the Fed to lower interest rates again next week. The U.S. Labor Department stated on Friday that following a 0.4% increase in August, the September CPI rose by 0.3% month-on-month; the annual rate was recorded at 3.0%, which was slightly higher than the 2.9% increase in August. Excluding the more volatile food and energy components, core CPI rose by 0.2% month-on-month (compared to 0.3% in August), and the year-on-year increase decreased from 3.1% in August to 3.0%. Although the government shutdown led to a halt in the release of economic data, the CPI report was still published to assist the Social Security Administration in calculating the cost-of-living adjustment for millions of retirees and other benefit recipients in 2026. The data was originally scheduled to be released on October 15th. As businesses have dealt with the inventory accumulated before the widespread implementation of Trump's tariffs and absorbed some of the tax burden themselves, the transmission effects of import tariffs have been relatively gradual. Economists point out that businesses have achieved this at the expense of hiring and estimate that consumers have so far borne approximately 20% of the tariff costs. (FX678)