US consumer inflation rose to 3.0 percent in September, a slight increase from the 2.9 percent recorded in August, according to the Labor Department. The monthly inflation rate was 0.3 percent, with the gasoline index jumping 4.1 percent between August and September. The food index rose by a more modest 0.2 percent, driven by a 0.3 percent increase in the cost of food at home.
The underlying “core” inflation, which excludes volatile food and gas prices, came in at 3.0 percent, below expectations. These figures provide valuable insight into the health of the world’s largest economy, particularly in the absence of other official data releases due to the ongoing US government shutdown.
The shutdown, caused by a standoff between policymakers on Capitol Hill, has halted the release of almost all other official data. Republicans are refusing to grant Democrats’ demands to extend subsidies that make health insurance affordable for millions of Americans. In the absence of official data, people have had to rely heavily on private sources of information, making it challenging for policymakers at the Federal Reserve to make informed decisions about interest rates.
Despite the acceleration in inflation, a rate cut is widely expected from the Federal Reserve next week. Policymakers are likely to cut rates by another 25 basis points, building on the bank’s decision to implement its first rate cut of the year in September. This move is driven by concerns about the sharp slowdown in job creation in recent months, with US job growth coming in at just 22,000 in August.
Futures traders see a roughly 99 percent chance that the Fed will announce a 25 basis point cut, bringing its benchmark lending rate down to between 3.75 and 4.00 percent. The expected rate cut is a response to the flagging labor market, as policymakers aim to support the economy while tackling inflation and unemployment. With the current economic uncertainty, the Fed’s decision will be closely watched, and its impact on the US economy will be monitored in the coming weeks.
