Forecasters anticipate a notable acceleration in the Consumer Price Index (CPI) for September, potentially marking a 17-month peak. This expected rise to 3.1% annually reflects the ongoing impact of tariffs and represents a reversal of the previous trend of slowing inflation. This development poses a challenge to the Federal Reserve's efforts to stabilize prices, yet the central bank is still poised to cut interest rates, prioritizing job market stability over inflation control, especially given the steady core inflation figures.
Economic projections indicate that the Consumer Price Index for September is likely to show an annual increase of 3.1%. This forecast, compiled from a survey of leading economists, suggests that inflation is not only accelerating but could reach a level not seen since May 2024. This increase follows a consistent upward trajectory in the year-over-year inflation rate since April, a period coinciding with the implementation of widespread import tariffs. These tariffs have effectively reversed the post-2022 trend of decelerating inflation, which had brought price increases closer to the Federal Reserve's 2% target.
Despite the concerning rise in overall inflation, analysts believe it will not deter the Federal Reserve from its plan to lower interest rates later in October. The central bank recently cut its benchmark federal funds rate in September, signaling a shift in focus towards supporting an ailing job market. The Fed appears to be more concerned with preventing unemployment from rising than with actively combating the current inflationary pressures. This strategy suggests a belief that other economic factors, such as lower rent increases, could help mitigate the broader inflation rate.
Core inflation, which excludes the more volatile categories of food and energy prices, is projected to remain stable at 3.1% in September, unchanged from August. This stability in core inflation provides some reassurance that underlying price pressures may not be escalating as rapidly as the headline figure suggests. Economists from Wells Fargo, Sarah House and Nicole Cervi, highlighted that while goods inflation is expected to remain high due to tariffs, a moderation in shelter costs could help cool service-related inflation.
The release of the September CPI report holds particular significance as it is one of the limited official economic data sets made available during the ongoing government shutdown. The Bureau of Labor Statistics recalled furloughed employees specifically to publish this crucial report, underscoring its importance in assessing the nation's economic health amidst various challenges. The data will offer critical insights into the interplay of trade policies, market dynamics, and monetary policy decisions.
The anticipated uptick in September's inflation figures, primarily driven by tariffs, marks a significant shift in the economic landscape. While this resurgence in inflation presents a challenge, the Federal Reserve's sustained focus on mitigating unemployment, coupled with stable core inflation, indicates a nuanced approach to economic management. The forthcoming CPI report will be a key indicator for understanding the future direction of both inflation and monetary policy decisions.