Inflation Eases as US Consumer Prices Rise 0.3% in September
Washington, October 24, 2025 — The United States consumer price index (CPI) rose less than expected in September, signaling a modest cooling in inflationary pressures as policymakers at the Federal Reserve prepare for their next interest rate decision.
According to data released by the Bureau of Labor Statistics (BLS) on Friday, consumer prices increased by 0.3% from the previous month, down from a 0.4% gain in August. On an annual basis, prices climbed 3% year-over-year, slightly above August’s 2.9% rise but below analysts’ expectations.
The report suggests that while inflation remains above the Fed’s 2% target, price pressures are gradually moderating—a potential sign that the central bank’s rate hikes and recent economic slowdown are beginning to take effect.
“Today’s CPI data shows an economy where prices continue to rise faster than the Federal Reserve’s preferred pace,” said Heather Boushey, senior research fellow at the Harvard Kennedy School’s Reimagining the Economy Project, in comments to Al Jazeera.
Energy Prices Drive September Inflation Gains
The largest increases in September came from the energy sector, with gasoline prices surging 4.1% month-over-month, marking the primary driver of the headline CPI increase. Overall, the energy index rose 1.5% in September.
Food prices rose by 0.2%, a slower pace than the 0.5% increase in August, offering some relief to American households. Prices for items excluding food and energy—known as core inflation—rose 0.2%, after a 0.3% gain in the prior month.
Core categories such as shelter, transportation, apparel, and household goods saw moderate price increases, underscoring a steady but cooling inflation trend across most consumer sectors.
CPI Report Released Despite Government Shutdown
Despite an ongoing federal government shutdown, the BLS published the CPI report to enable the Social Security Administration (SSA) to calculate its 2026 cost-of-living adjustment (COLA).
The SSA announced that beneficiaries will receive a 2.8% increase in their monthly payments next year, based on the inflation data released Friday.
However, the shutdown has caused a broader blackout of economic data, with more than half of US reports—including retail sales, housing, and labor statistics—currently unavailable.
“The central bank is gauging rates with limited data,” Boushey noted. “The lack of a coherent economic agenda from the Trump administration threatens to push the economy into reverse.”
The White House confirmed that no new inflation data will be released next month due to the shutdown, citing staffing and fieldwork challenges at the Bureau of Labor Statistics.
“Surveyors cannot deploy to the field—depriving us of critical data,” the White House said in a post on X (formerly Twitter).
Fed Expected to Cut Interest Rates Again
The inflation report arrives just days before the Federal Reserve’s policy meeting, where officials are expected to cut the benchmark interest rate by 25 basis points, lowering it to a target range of 3.75%–4.0%.
The anticipated rate reduction would mark the second cut since September, reflecting growing concern that high borrowing costs and stagnant consumer spending could push the economy toward recession.
Economists say the Fed will likely balance its inflation-fighting goals with efforts to support growth amid political uncertainty and limited fiscal guidance.
“The Fed has to walk a tightrope—reducing rates to sustain employment while preventing inflation from reigniting,” said an independent market analyst based in New York.
Markets React Positively to Cooling Inflation
US stock markets reacted positively to the CPI report. As of mid-morning trading in New York (15:00 GMT), the Nasdaq Composite was up 1%, the S&P 500 gained 0.7%, and the Dow Jones Industrial Average climbed 0.9%.
Investors interpreted the softer inflation data as a signal that the Fed’s upcoming rate cut could help stabilize growth without triggering renewed inflationary pressures.
Bond yields also edged lower, reflecting increased market confidence that the central bank will move ahead with a measured easing cycle through the end of 2025.
Inflation Outlook: Gradual Cooling Amid Economic Uncertainty
While September’s CPI figures suggest a gradual easing of inflation, analysts caution that risks remain. Persistent energy price volatility, potential supply chain disruptions, and the ongoing government shutdown could influence data collection and distort upcoming reports.
The Federal Reserve’s next steps will likely depend on inflation trends through late 2025 and early 2026.
For now, lower-than-expected consumer price growth gives policymakers a brief reprieve—but not yet a reason to declare victory.
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