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The latest Consumer Price Index data shows headline inflation remaining around 3%, which shouldn’t prevent the Federal Reserve from cutting rates again this week given their focus on supporting the labor market.

What caught our eyes this week

Nothing spooky in September Consumer Price Index

As the federal government shutdown stretches on, investors have been starved of major macroeconomic data for nearly a month. But thanks to cost-of-living adjustments for next year’s Social Security payments, the Bureau of Labor Statistics finally gave us something to sink our teeth into. Headline consumer price inflation is still sticky, running in the range of 3% as it has for over two years. Under the surface, shelter inflation continues to cool as falling rent growth slowly gets incorporated into the surveyed metric. Inflation for other services is running hotter (as it typically does), but a brief bump higher over the summer appears to have dissipated. Goods prices are slowly climbing, up to 1.5% year over year. If we extrapolate the trend in monthly price changes over the past few months, we could see goods inflation climb to somewhere in the range of 3% over the next few quarters. This could be manageable if shelter and services prices don’t accelerate while tariff rates are still being absorbed by goods prices. For now, with the Federal Open Market Committee focused on keeping a floor under softer labor markets, this report removes the last potential roadblock to delivering a second rate cut at this week’s meeting.

Year-over-year Consumer Price Index graph

CHART OF THE WEEK: Cerity Partners, FactSet as of 10/24/2025

Past performance does not guarantee future results.

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