Economists said inflation rose slightly in September due to higher prices for basic goods such as gasoline and electricity, but President Donald Trump’s tariffs weighed on spot prices for goods such as clothing and furniture.
The Consumer Price Index, a key inflation barometer, rose 3% in September from a year earlier, the Bureau of Labor Statistics said Friday. That was up from 2.9% in August, but lower than economists expected.
“Core” products, which exclude volatile food and energy prices, also rose 3% in September compared to the same month last year.
“Inflation is uncomfortably high and will accelerate in the coming months,” said Mark Zandi, chief economist at Moody’s.
The CPI tracks how quickly the prices of consumer goods and services, from coffee and bananas to club memberships and concert tickets, rise or fall.
Due to the ongoing government shutdown, the release of Consumer Price Index (CPI) statistics has been postponed from October 15 to Friday. In the absence of other economic indicators, the report provides an overview of the state of the U.S. economy ahead of next week’s Federal Reserve meeting. The CPI announcement also allowed the Social Security Administration to announce cost-of-living adjustments for 2026 that will affect approximately 75 million people.
Food prices, housing costs, clothing, and airfares all rose in September.
Gasoline prices rose the most, rising 4.1% from the previous month.
“3% mark”
As it stands, inflation remains well above the Fed’s 2% target and is “sticking around that 3% level,” said Mike Pugliese, senior economist at Wells Fargo Economics.
Inflation rose sharply in 2021-22 and has since slowed, but “in the last 12 months it has stalled,” Pugliese said.
From a psychological perspective, “3% is a fine line,” said Stephen Cates, a financial analyst at Bankrate. “Rising inflation remains a concern.”
tariff effect
“Tariff increases are further accelerating inflation, as evidenced by soaring prices for beef, coffee, home furnishings, electronics and clothing,” Zandi said. Most of these products are imported from overseas.
Still, Pugliese said long-term inflation expectations have moderated somewhat and are likely to decline by the second half of next year, “particularly as the temporary impact on price increases from tariffs wears off.”
Tariffs are taxes on foreign imports that are paid by U.S. companies that import goods or services. Companies often absorb some of the cost and pass it on to consumers through higher prices.
Economists say the size and scope of the damage from the tariffs remains unclear. But as trade negotiations progress, consumers could face an overall average effective tariff of about 15%, Zandi said. This is an increase from the current rate of about 10%.
An Oct. 17 analysis by Yale University’s Budget Institute found that the tariff policies currently in place are expected to cost households an average of $1,800 in 2025.
“Pass-through has been delayed in part because the tariff situation is unfolding in many places and companies want to see where tariffs settle before raising prices,” Zandi said. “Companies don’t want to get caught up in the political buzzsaw, but being dragged into it is inevitable.”
September inflation information was due to be released on October 15, but was postponed due to the government shutdown and came amid a lack of other economic data.
Bureau of Labor Statistics officials have been recalled to release the Consumer Price Index report because it is used as a measure of the Social Security cost of living adjustment released Friday.
Inflation reporting is also important to Fed policymakers, and all other data collection and publication will be halted during the shutdown.
Economists say the central bank is expected to cut interest rates by a quarter of a percentage point at next week’s policy meeting, which could risk keeping inflation high.
“When you’re in this data desert that we’re in, you’re going to argue that we should keep doing what we’re doing, and that would imply a rate cut,” Zandi said. “I think they’re sticking to the script because they don’t have the data.”
President Trump has been highly critical of the Fed’s policies, repeatedly saying that interest rates should be lowered significantly. Bankrate’s Cates said additional BLS data could strengthen the argument for further rate cuts, especially if the monthly jobs report indicates further weakness.
“It’s a little backwards to tie the Fed’s hands when the data almost certainly supports the administration’s desired position,” Cates said.
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