US Inflation Data Comes in Soft, Building Case for More Fed Cuts

Kit Juckes, Head of FX Strategy at Societe Generale, reacts to US CPI and talks about the implications for the global economy.

A delayed snapshot of inflation in September came in softer than expected, potentially offering a path for the Federal Reserve to cut interest rates beyond next week’s meeting.

The core consumer price index, excluding the often volatile food and energy categories, increased 0.2% from August, according to Bureau of Labor Statistics data out Friday. That was the slowest pace in three months and restrained by the smallest increase in a key measure of housing costs since early 2021.

In the absence of other official reports during the government shutdown, the highly anticipated reading is a welcome surprise, particularly for several policymakers who are leery of cutting rates further. While the central bank was already widely expected to lower borrowing costs at next week’s meeting, investors are betting the report will help convince officials that they can do so again in December — especially if they don’t get another CPI report next month.

The September CPI report was initially scheduled to come out on Oct. 15 but was delayed because of the ongoing federal government shutdown. While most BLS operations have ceased since the Oct. 1 closure, the agency recalled staff to prepare this release so the Social Security Administration could tally its annual cost-of-living adjustment, which will total 2.8% for next year.

Economists generally weren’t concerned about the quality of the September inflation report because data collection was done before the government closed. But BLS hasn’t been able to collect new price information since then, and a White House-affiliated X account said Friday “there will likely NOT be an inflation release next month for the first time in history.”

Read More: October Price Data Unlikely to Be Released, White House Says

“Once funding is restored, BLS will resume normal operations and notify the public of any changes to the news release schedule on the BLS release calendar,” a BLS spokesperson said in an emailed comment.

The S&P 500 opened higher while Treasury yields and the dollar pared earlier losses.

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