CPI Report Today: Inflation Climbs to 3%—But Fed Is Still Expected To Cut Rate

The September Consumer Price Index (CPI) increased to 3% compared to a year ago according to the U.S. Bureau of Labor Statistics—but the Federal Reserve is still all but certain to proceed with a rate cut next week.

This marks the first set of significant data markers since the government shutdown. Federal data has been largely paused since the shutdown started Oct. 1. Today's delayed CPI is the lone inflation marker before the Federal Reserve is set to start its two-days of meetings next week, Oct. 28–29.

Headline inflation, which measures overall consumer prices, rose at the fastest pace since January and up 2.9% from August. Core inflation, which excludes volatile food and energy prices and is a key metric for Fed policymakers, was also up 3% from a year ago.

On a monthly basis, headline CPI ticked up 0.3% from August, while core CPI increased 0.2%.

The Trump Administration welcomed the latest inflation data, which came in slightly below many economists' forecasts, but White House Secretary Karoline Leavitt warned that there likely will not be a CPI report for October because of the ongoing shutdown.

"Democrats choosing to keep the government closed will likely result in no October inflation report, which will leave businesses, markets, families, and the Federal Reserve in disarray," she wrote on X.

Housing, food, gas prices spike in September

A wide array of common household expenses saw increases in September.

Housing costs were up 3.6%  year over year and 0.2% month over month, while furniture prices rose 3.8% annually and 0.9% from August.  

Gas prices surged 4.1% in September from the month before, playing a major factor in the rising inflation. Electricity costs rose 5.1% annual and natural gas utilities were up 11.7%.

Meanwhile, overall food costs increased 3.1% annually, with restaurant prices climbing 3.7% over the past 12 months and 0.1% from August, and grocery prices (food at home) rising 2.7% from last year and 0.3% month over month.

Meat, poultry, fish, and eggs index increased 5.2% from a year ago, with the price of beef steaks soaring 16.6% on an annual basis.

Realtor.com® Senior Economist Jake Krimmel explains the CPI is the Fed’s preferred inflation gauge,

"The PCE (personal consumption expenditures) price index, won’t arrive until Oct. 31, leaving policymakers to make decisions with even more limited information," says Krimmel.

The economist explains that for Chair Jerome Powell and the Board of Governors, this benign reading reinforces expectations for a 25-basis-point rate cut next week.

Inflation remains above the Fed's 2% target but continues to move gradually. On the other side of the central bank's congressional dual mandate, labor market data, now halted by the shutdown, show signs of weakening.

Impact on the housing market

For housing, Friday's CPI report offers a modicum of optimism following another pickup in home sales last month.

"A calmer inflation trend could help ease upward pressure on long-term yields, keeping the 10-year Treasury near 4% and mortgage rates around 12-month lows," says Krimmel. "Lower rates would improve affordability and give homebuyers more purchasing power heading into year’s end, but they aren’t a cure-all."

However, higher consumer prices mean that households are left with less money to save at the end of each money, potentially weakening homebuyer demand recovery.

This is a breaking news story. Check back for more updates.