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By Hugh Cameron
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The Department of Labor has handed President Donald Trump a mixed set of inflation figures, with core inflation ticking down but the annual headline rate rising thanks to higher gas prices.
On Friday, the Bureau of Labor Statistics released its Consumer Price Index (CPI) report for September, which had been postponed due to the ongoing government shutdown.
The BLS found that prices rose 0.3 percent between August and September, compared to the previous month's 0.4 percent increase, and that the annual inflation rate ticked up to 3.0 percent from 2.9 percent. Core inflation rates—excluding the volatile food and energy categories—came in at 3.0 percent and 0.2 percent on an annual and monthly basis, respectively, down from 3.1 percent and 0.3 percent.
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Why It Matters
The results came in slightly softer than market expectations, which the White House has celebrated as "good news for American families."
Prior to the release, originally due out on October 15, economists and forecasters had headline inflation rising to between 3.0 and 3.1 percent, with the other measures remaining broadly flat and energy and food prices driving many of the gains.
The release ends days of speculation over whether Trump’s tariffs had finally begun to meaningfully affect consumer price data. While annual inflation reached its fastest pace since January, and remains well above the Federal Reserve’s 2 percent target, analysts believe the figures make it all but ensure that the central bank will cut rates at its upcoming meeting.
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What To Know
The BLS suspended operations due to the government shutdown, now in its fourth week. However, furloughed staff were temporarily recalled to compile the critical report on which the Social Security Administration relies to calculate cost-of-living adjustments and ensure the "accurate and timely payment of benefits."
The index for gasoline rose 4.1 percent between August and September and “was the largest factor in the all items monthly increase,” the agency said in its report, though the index is down 0.5 percent over the previous 12 months. The broader energy index was up 1.5 percent in September and 2.8 percent annually.
The food index increased by 0.2 percent in September and is up 3.1 percent year over year. Meanwhile, services gained 0.2 percent in September and are up 3.6 percent annually.
“Tariffs are still pushing up goods prices and the passthrough is broadening, with clothing, furniture and personal goods prices all posting strong gains,” Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in an analysis following the CPI release. “We estimate tariffs have added 0.4 [percentage points] to headline inflation.”
However, Pearce said that, assuming there are no more sudden tariff hikes, the “one-off” impact on goods prices will begin to subside in 2026.
What People Are Saying
White House Press Secretary Karoline Leavitt, on X: "Inflation came in below market expectations in September thanks to President Trump’s economic agenda. This is good news for American families, and it’s a shame the Democrats are using them as ‘leverage’ to fund health care for illegal aliens."
Daniela Sabin Hathorn, senior market analyst at Capital.com, said in a note following the CPI release: “U.S. consumer inflation has come in softer than expected across the board, helping the easing narrative after weeks of data blackout had left markets shooting somewhat in the dark.”
“Given the Fed had already acknowledged they would allow for a period of above-target inflation whilst still adjusting the policy rate to the softening labour market, the risk was skewed to the upside if the data fell in-line or short of expectations, as has happened,” she added.
Bankrate Financial Analyst Stephen Kates said in a note: “Despite the lack of labor market data due to the government shutdown, this lighter-than-expected CPI report should offer a confidence boost to a Federal Reserve that already appeared inclined toward additional rate cuts in October and December. The latest inflation data strengthens the case that continued easing is appropriate in light of the known conditions of the labor market.”
**Economist Michael Pearce said in a note: “**The smaller than expected rise in consumer prices in September gives the green light for a rate cut next week, but with inflation likely to remain closer to 3 percent than 2 percent for most of next year, market expectations for rate cuts still appear too aggressive for 2026. We expect the Fed will move to slow the pace of easing, with three cuts spread over the course of next year.”
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, said in a note: “Much like a Sherlock Holmes’ story, inflation is the dog that didn’t bark. So many people have been expecting a sharp increase in inflation and have positioned bearishly as a result, but the market is likely to keep squeezing the shorts until they realize that the economy – and corporate America – is more resilient than many expected.”
What Happens Next
Zaccarelli added that the numbers do “nothing” to stop the Federal Reserve from cutting rates by another 25 basis points at its upcoming meeting on October 28-29.
According to Leavitt, if the government shutdown persists, it will "likely result in no October inflation report, which will leave businesses, markets, families, and the Federal Reserve in disarray."
The CPI report for October is scheduled for release on November 13. The BLS said earlier this month that "no other releases will be rescheduled or produced until the resumption of regular government services."
Update 10/24/25, 10:12 a.m. ET: This article was updated with additional information.
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