The Consumer Price Index (CPI) for September has come in with a much softer inflation reading than most analysts were anticipating. This indicates that price pressures are starting to subside. This is especially important as the newest report shows how many different factors contributed to pushing overall CPI growth. The underlying rate of consumer inflation is still a high 3% and going up.
Specifically, the inflation-stable core CPI—minus food and energy—rose a modest 0.23%. Most unexpectedly, owners’ equivalent rents increased just 0.1%, the smallest monthly increase since November 2020. This points toward further cooling in the housing market, with potentially large implications for future inflation trends.
Core goods inflation increased only 0.2%. Opposite forces kicked in with respect to the used cars market. Prices fell, exposing deep disparities in the consumer goods category. On the other hand, apparel prices saw a second-disconcerting-large increase adding to the confused consumer spending trends.
The report emphasizes that core CPI inflation has remained stubbornly consistent at 3.1% year over year. Moreover, when looking at core CPI inflation on a three month annualized basis, we saw 3.6% inflation. This information suggests a continuing calmness in key core inflation measures, even as certain categories rebound and swing.
Gasoline prices skyrocketed by 4%, pushing the overall CPI increase. Definitely true—though some analysts are currently hoping that inflation will stabilize at about 3% through the middle of 2024. Tariff proponents market experts predict the effect of the tariffs will begin to fade in the second half of next year. This proposed amendment may result in substantial recalibration of inflation paths.
Looking forward, the next CPI report will be released in December. This will come just in time for a critical final meeting of the Federal Open Market Committee (FOMC) set for Dec. 9-10. The results of these conversations will be important in determining the path forward for monetary policy, especially in a response towards ongoing inflation.