US inflation accelerated to 3% in September, marking the first time it has reached this level since January, according to data released by the Labor Department. The figure, which measures the annual change in consumer prices, was up from 2.9% in August but fell short of the 3.1% forecast by analysts, providing a mixed signal for policymakers.
The report, published amid a recent government shutdown, highlighted persistent price pressures driven in part by new trade tariffs. Key contributors included a 4.1% monthly increase in petrol prices and sharp rises in costs for items like furniture, which jumped 3.8% over the year. However, the overall pace moderated slightly, with prices rising 0.3% from August to September compared to 0.4% in the previous month, indicating some relief from earlier spikes.
Services such as haircuts, airfares, and daycare continued to see climbing costs, reflecting broader inflationary trends in the economy. Notably, housing costs showed signs of easing, with rents rising 3.5% annually—unchanged from August—and owners’ equivalent rent increasing just 0.1% monthly, the smallest gain since January 2021. This moderation in housing, a significant component of inflation, offered a glimmer of hope for consumers struggling with high living expenses.
Grocery prices rose 2.7% over the year, with specific items like beef and veal surging more than 14% and coffee prices up nearly 19% annually, though they dipped slightly in September. These increases underscore the ongoing strain on household budgets, even as some categories saw moderation, and they highlight the uneven impact of inflation across different sectors of the economy.
The data comes just days before the Federal Reserve’s scheduled meeting, where officials are expected to consider another interest rate cut. Analysts from Wells Fargo and Fitch Ratings suggested that the softer-than-expected inflation numbers bolster the case for easing monetary policy, though they caution that pressures remain above the Fed’s 2% target, complicating the central bank’s efforts to balance growth and stability.
Olu Sonola of Fitch Ratings noted that the Fed might find relief in inflation stabilizing around 3%, as tariff impacts have been muted so far, with many businesses hesitating to pass full costs to consumers. The report also influences Social Security adjustments, with the administration announcing a 2.8% increase in payments for next year, reflecting the cost-of-living changes and providing some support to retirees amid economic uncertainties.
Looking ahead, the economy faces a delicate balance between slowing job growth and persistent inflation, complicated by political factors like trade policies. While the latest data may support a rate cut, it does not fully alleviate concerns about long-term price stability, leaving the Fed with careful decisions in the coming months as it navigates an environment of mixed signals and global economic pressures.