September CPI Report: Inflation Remains Sticky, but Cooler Than Expected

The Bureau of Labor Statistics rescheduled the release of the September Consumer Price Index report to Oct. 24 owing to the government shutdown. The report was originally scheduled for Oct. 15.

Key Takeaways

• Consumer prices remained elevated in September, with CPI inflation coming in at 3.0%.
• Prices of new vehicles, furniture, appliances, and apparel rose amid higher import costs from tariffs that are being passed on to consumers.
• Analysts expect the Fed to cut interest rates at its October and December meetings.

Inflation picked up again in September, according to the latest Consumer Price Index report.

Data released Friday by the US Bureau of Labor Statistics showed that certain goods prices, including new vehicles, furniture and appliances, and apparel, ticked higher in September—evidence that President Donald Trump’s tariffs “are continuing to push prices up incrementally,” says Preston Caldwell, senior US Economist at Morningstar.

Overall, the report showed that inflation rose at a 3.0% annual rate and up 0.3% from month-ago levels in September, coming in just shy of economists’ forecasts. Core inflation, which excludes volatile food and energy prices, rose 3.0% on an annual basis and 0.2% on a monthly basis, a slight slowdown compared to August.

The Federal Reserve uses a different measure of inflation, the Personal Consumption Expenditures Price Index, as its preferred indicator of price pressures. Caldwell expects annual core PCE inflation to come in at 2.8% in September. That’s well above the Fed’s 2.0% long-term target but down from the 2.9% increase in August.

September CPI Report Key Stats

• CPI rose 0.3% for the month after rising 0.4% in August.
• Core CPI rose 0.2% after rising 0.3% in August.
• CPI increased 3.0% year over year after increasing 2.9% in the prior month.
• Core CPI rose 3.0% from year-ago levels after rising 3.1% in August.

Goods Prices Show Tariffs Impact

The largest impact of tariffs continues to be seen in rising prices for certain consumer goods. Overall, core goods prices rose 0.2% in September after similar rises throughout the summer. On average, core goods prices tend to stay flat, according to Caldwell.

New vehicle prices ticked up 0.2% month over month and 0.8% year over year, after dropping 0.6% in 2024 on average. Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth, says new vehicle prices are heavily affected by tariffs and September’s uptick “signals that higher import prices in the sector are being passed along to consumers.”

“In the absence of tariffs, core PCE inflation would be around 2.4% year over year,” Caldwell explains. “So assuming tariffs constitute a one-time shock, then we should only be moderately concerned about inflation presently.”

Excluding cars, prices for durable goods rose 0.9% for the month, with hefty increases for furniture and appliances. Apparel also saw a sizable increase of 0.7%.

Fed Expected to Make Two More Rate Cuts in 2025

Futures markets predict a 97% chance of a 0.25-point interest rate cut at the Fed’s October meeting, according to CME FedWatch, with a 96% chance of another such cut at the December meeting.

The September inflation report “allows the Fed to focus on weakening employment data from the last couple of months, paving the way for a rate cut at their meeting next week,” says Pappalardo. “While there has been no update on employment since September 5 due to the government shutdown, softening labor markets will likely continue to be the Fed’s main concern.”

Caldwell also expects quarter-point cuts in October and December, noting that “signs of a deteriorating labor market suggest that risks to the full employment side of the Fed’s dual mandate are at least as severe as risks to inflation.”