What we're covering here
• The September CPI inflation report showed that prices rose at a slower-than-expected rate of 0.3% last month, but annual price hikes for a range of consumer goods rose at the fastest pace so far this year.
• Wall Street rallied after the data release, as it likely cements another rate cut from the Federal Reserve at its meeting next week.
• This is the first and only piece of official economic data the federal government has released this month, due to the shutdown. The White House said Friday that the October inflation report likely would not be released at all.
• Economists had predicted the data would show that annual inflation ticked up in September to 3.1% from 2.9% in August and rose 0.4% on a month-to-month basis.
Inflation is "uncomfortably high" and likely to get worse, Moody’s economist Mark Zandi says
Even though Wall Street is celebrating the better-than-feared inflation report, some economists worry the worst may not be over when it comes to prices.
“Inflation is uncomfortably high and is set to accelerate further in the coming months,” Mark Zandi, chief economist at Moody’s Analytics, told CNN in an email on Friday.
Zandi noted that while the cost of electricity, rent and used cars all eased in September, that likely won’t continue.
The fingerprints of tariffs continue to be visible in some places, including prices for meat, clothes, furniture, appliances and coffee.
The Trump administration’s immigration crackdown may also be impacting price hikes for personal services, Zandi said.
The inflation report showed significant monthly increases in the price of moving/storage services (1.3%) as well as hospital and related services (0.8%). Prices on elderly home care spiked 7%, the most on record.
“Inflation is firmly above the Federal Reserve’s direct,” Zandi said, “and the direction of travel is for even higher inflation going into next year.”
Dow gains 500 points as cooler-than-expected inflation data fuels rally
Wall Street was set to end the week on a high note with the Dow, S&P 500 and Nasdaq Composite all rising to fresh record highs.
The Dow rose 533 points, or 1.14%, pushing it above the 47,250 mark. The S&P 500 rose 1%, lifting it above the 6,800 mark. The tech-heavy Nasdaq gained 1.3%.
Stocks jumped higher this morning after Consumer Price Index data for September showed annual inflation heated up less than expected.
“All else equal, today’s CPI report should give the Fed the green light to focus its efforts on the health of the labor market,” Jason Pride, chief of investment strategy and research at Glenmede, said in an email. “As long as incoming data signal more risk to employment than to inflation, the Fed’s policy path likely points toward additional easing.”
Fed rate cuts could lower savings rates and borrowing rates, encouraging spending and investing while stimulating business activity, creating a sustained tailwind for the stock market. A rate cut can also lower bond yields, making higher-yielding assets like stocks more appealing for investors.
Elsewhere in markets, Treasury yields ticked lower but pared earlier, steeper declines. The US dollar index was flat.
Hassett says “decelerating” inflation will ease pressure on Fed
President Donald Trump’s top economic adviser Kevin Hassett said Friday that inflation is “decelerating,” a sign he believes will “take all the pressure off” the Federal Reserve as it decides whether to continue with rate cuts.
“It was a really good report for a number of reasons,” Hassett, who is head of the National Economic Council, told Fox Business from the White House lawn. “It went down a little bit from August,” he continued. “Our expectation is that inflation is decelerating, and that will take all the pressure off the Fed to keep on the path that they’re on,” Hassett added.
The September Consumer Price Index report showed prices rose 0.3% last month, a slightly slower pace than economists had expected. That likely paves the way for the Fed to cut rates again, at its policy meeting next week.
Here's what Wall Street is saying about the latest inflation data
Stocks jumped higher Friday morning after data showed inflation was cooler than expected in September.
The Dow was up 415 points, or 0.89%. The S&P 500 rose 0.88%, and the tech-heavy Nasdaq gained 1.2%. Each of the major indexes notched intraday record highs.
Here’s what investors and economists are saying about the latest Consumer Price Index data:
- “Inflation coming in weaker than expected further solidifies a continuation of the Federal Reserve’s rate cutting cycle, at least for the next two meetings.” — Skyler Weinand, chief investment officer at Regan Capital.
- “For the Fed, concerns about the job market still outweigh frustrations with inflation.” — Bill Adams, chief economist at Comerica Bank.
- “Signs of spillovers from tariffs remain weak and support the view that tariff hikes will translate into a one-off bump in prices instead of persistent inflationary pressures.” — Krishna Guha, vice chairman at Evercore ISI.
- “I was a little surprised [the inflation data] came in light.” — Thomas Martin, senior portfolio manager at Globalt Investments. “I still think that inflation is a risk.”
- “There is still a large amount of uncertainty about the ultimate price impact of tariffs in the coming quarters.” — Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management. “However, the observed impact so far has been lower than expectations which, coincident with a weakening labor market, has allowed for a resumption in easing from the Federal Reserve.”
Consumer sentiment declines this month over concerns about prices, not the government shutdown
Americans remain concerned about the higher cost of living and are mostly unfazed by the economic effects of the federal government shutdown.
Consumer sentiment fell 1.5 points in October to a final reading of 53.6, the University of Michigan said Friday in its latest survey. A preliminary reading earlier this month showed that sentiment was mostly flat.
That’s the seventh-lowest reading on records going back to 1952.
October’s weak reading mostly reflects persistent concerns about inflation, and showed souring attitudes among middle-age and older Americans as younger consumers felt more upbeat.
“Overall, consumers perceive few material changes in economic circumstances from last month; inflation and high prices remain at the forefront of consumers’ minds,” Joanne Hsu, the survey’s director, said in a release.
The government shutdown’s impact is spreading through the economy, but it’s not yet registering with Americans’ feelings about the economy more broadly.
“There was little evidence this month that consumers connect the federal government shutdown to the economy,” Hsu said. “Only about 2% spontaneously referenced the shutdown during this month’s interviews, compared with the 10% of consumers who did so in January 2019 during that 35-day shutdown.”
Why the cost of coffee is wildly volatile
Coffee prices dropped by 0.1% on a monthly basis in September, following August’s 3.6% monthly rise, according to Consumer Price Index data released Friday. But compared to last September, Americans are paying 18.9%% more for coffee.
And Americans may need to brace for prices to get even higher if President Donald Trump follows through on his threat to enact steeper tariffs on Colombian shipments. Already, coffee from Brazil, the top country the United States purchases coffee from, faces a 50% levy.
With very little coffee grown domestically, higher tariffs on Colombia, the number-two coffee exporter for the United States, would all but certainly make a cup of joe more expensive.
Mortgage rates are at their lowest level of the year
The average rate on a 30-year fixed mortgage fell to 6.19% this week, marking the lowest level so far this year, according to data from mortgage giant Freddie Mac.
Lower mortgage rates and softer home prices might be improving the housing affordability picture for many Americans still looking to break in to homeownership.
September sales of existing homes reached the highest pace in seven months, the National Association of Realtors reported Thursday.
“As anticipated, falling mortgage rates are lifting home sales,” Lawrence Yun, NAR’s chief economist, said in a statement.
Shelter, as the CPI report defines the cost of housing, makes up the largest chunk of the inflation report, making it the single-biggest driver of inflation readings. Friday’s report for the month of September showed that housing-related inflation continued to slow.
Read more here.
Dow gains 400 points as stocks clinch intraday record highs
Wall Street cheered on Friday as a cooler-than-expected inflation report sent stocks to record highs.
The Dow rose 411 points, or 0.88%. The S&P 500 gained 0.9%. The tech-heavy Nasdaq Composite gained 1.2%. Each of the major indexes notched intraday record highs.
Wall Street’s fear gauge, the VIX, fell 5%.
“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,” Chris Zaccarelli, CIO at Northlight Asset Management, said in an email.
White House says there likely won't be any October inflation report
White House press secretary Karoline Leavitt celebrated Friday’s Consumer Price Index report, which showed headline inflation came in slightly below economists’ expectations.
But she said in a post on X: “Democrats choosing to keep the government closed will likely result in no October inflation report, which will leave businesses, markets, families, and the Federal Reserve in disarray.”
Besides Friday’s inflation report, the government has paused all other economic reports due to the lapse in funding from the shutdown, which began on October 1.
Stocks open higher as inflation data supports Fed rate cut hopes
US stocks opened higher Friday morning after data showed annual inflation heated up in September but less than anticipated, paving the way for the Federal Reserve to cut interest rates at its upcoming policy meetings.
The Dow gained 236 points, or 0.5%. The broader S&P 500 gained 0.65%, and the tech-heavy Nasdaq Composite rose 0.86%. Wall Street’s fear gauge, the VIX, fell 4%.
Consumer prices rose 3% year-over-year in September, according to Bureau of Labor Statistics data. Economists had been expecting an annual rise of 3.1%.
“With the Fed cutting rates – and this report does nothing to stop them from a [quarter-point] cut next week – and corporate profits continuing to increase, it’s hard to see an interruption of this year’s bull market,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in an email.
Treasury yields fell as investors scooped up bonds to lock in the current relatively high rates ahead of expected Fed rate cuts. The US dollar slightly weakened against other currencies.
“Tariff-related inflation will remain a concern in the near term, but it is the jobs market that is becoming the more pressing issue for the Fed,” James Knightley, chief international economist at ING, said in a note.
Knightley said he expects the Fed to deliver quarter-point cuts in October and December, followed by additional rate cuts in early 2026.
Inflation means families must spend $208 more per month than a year ago
Inflation doesn’t need to be runaway to stretch family budgets.
Due to higher prices, the typical American household in September had to spend $208 more than a year earlier to buy the same goods and services, according to Moody’s Analytics data shared with CNN on Friday.
When compared with the start of 2021, when inflation started to really heat up, the typical household must spend an extra $1,043 each month for the same goods and services.
The findings demonstrate the snowballing effect inflation can have, shrinking how far paychecks go.
It’s true that the inflation rate is not nearly as high as during the Biden years – nor as high as some economists had predicted.
And yet prices are still increasing at an uncomfortably fast pace. Worse, they’re rising from elevated levels following historically high inflation.
Wages are up, too. But often only by enough to keep up with higher prices.
Social Security benefits will inch up 2.8% in 2026
Social Security recipients will receive a 2.8% boost in their monthly benefits in 2026, the Social Security Administration announced Friday. However, many seniors say the annual adjustments haven’t been enough to cover their ever-rising expenses.
The increase for 2026 is larger than the 2.5% cost-of-living-adjustment that beneficiaries received for this year, but far smaller than the ones when inflation was running rampant.
The annual adjustment, known as a COLA, is based on an inflation metric from the third quarter of the year. Inflation has moderated after being at around a four-decade high in 2022.
The increase was scheduled to be announced last week but was delayed by the federal government shutdown.
New inflation data could give Fed more confidence to continue cutting
Even though inflation increased last month, from an annual rate of 2.9% to 3%, it was less than the pickup economists were anticipating. While the Federal Reserve is missing key employment data due to the government shutdown, Friday’s Consumer Price Index report should give central bankers enough confidence to cut rates at their meeting next week.
“There was little in today’s benign CPI report to ‘spook’ the Fed and we continue to expect further easing at next week’s Fed meeting,” Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, said in a note Friday morning, Rosner also said a December cut is likely.
US inflation is back at 3%
The cost of living got even more expensive for Americans last month, with prices rising at the fastest pace in more than year.
Consumer prices rose 0.3% in September, which drove the annual rate of inflation from 2.9% to 3%, the highest it’s been since January, according to Bureau of Labor Statistics data released Friday.
Economists were expecting that inflation would continue to pick up speed, rising 0.4% for the month and 3.1% from the year before, according to FactSet estimates.
The cost of gas has been falling. Trump's sanctions on Russia could change that
Gas prices could rise on the Russia oil sanctions, eroding one bright spot in America’s stubborn inflation fight.
The surprising decision to punish Russia, the second-biggest crude oil producer on the planet, instantly sent oil prices surging this week.
The challenge for President Donald Trump is how to break the Russian war machine without causing a painful price spike that would exacerbate lingering frustrations about the cost of living among voters.
Record-high gas prices haunted the Biden-Harris administration after Russia invaded Ukraine in 2022. And high prices across the economy helped propel Trump back to the White House.
Now, Trump is trying to force an end to that deadly war while keeping gas prices low. It’s a risky strategy.
Read more here.
The impact of tariffs is starting to show up
Consumer Price Index reports in recent months have provided clear indications that prices for tariff-impacted goods are on the rise.
Economists have been watching the “core goods” category (which excludes gas and food) for signs of tariff-related costs being passed along to consumers. In August, core goods prices rose 0.3%, its highest rate in seven months.
“The tariff impact is increasingly visible, though pass-through remains gradual and uneven,” wrote Gregory Daco, chief economist at EY-Parthenon, in an analyst note Thursday about inflation.
Some of the categories with the biggest monthly price leaps in August were those heavily imported and highly exposed to tariffs: Sewing machines, fabric and supplies (+9.1%); jewelry (+6.8%); women’s outerwear (+4.4%); instant coffee (+4.9%); tomatoes (+4.5); beverage materials including coffee and tea (+2.8%); bananas (+2.1%).
“Looking ahead, inflationary pressures are likely to persist as tariffs continue to filter through, but the pace of acceleration should remain contained relative to the recent post-Covid experience,” Daco wrote.
Stubborn inflation is contributing to a K-shaped economy, where consumer spending is concentrated in higher-income households, with lower-income tiers pulling back on their shopping due to “muted pay increases and mounting financial strain,” Daco noted.
Morning Consult said in a note this week that an October survey showed the share of adults not noticing tariff-related price increases had fallen to “a new low of 8%” this month.
Stock futures rise ahead of key inflation report
US stock futures were higher Friday morning ahead of the release of highly anticipated inflation data.
Dow futures were up 64 points, or 0.14%. S&P 500 futures rose 0.3%. Nasdaq 100 futures gained 0.46%.
Stocks are coming off a day in the green. The Dow, S&P 500 and Nasdaq Composite are each trading less than 1% away from an all-time high.
Investors are awaiting Consumer Price Index data for September, set to be released at 8:30 a.m. ET.
The inflation report could make or break optimism about a Federal Reserve rate-cutting cycle, analysts said. A hotter-than-expected reading could spook investors because it could change the Fed’s approach to cutting rates, said Ross Mayfield, an investment strategist at Baird. The central bank is set to meet on Tuesday and Wednesday to discuss monetary policy and interest rates.
“Even if it doesn’t deter them from cutting next week, maybe it deters the next rate cut in December, or changes the path and calculus for 2026,” Mayfield said. “I think that’s what is at stake.”
On the flipside, a cooler-than-expected number could confirm investors’ hopes for more Fed rate cuts, supporting the next leg of the market rally, according to Mayfield.
The 10-year Treasury yield ticked up to 4.01%. The US dollar slightly strengthened against other currencies.
What the numbers are expected to show
Economists expect the latest consumer price data to show that costs for a slew of commonly purchased goods and services rose at a faster-than-typical clip (0.4%) last month.
That would lift the annual rate of inflation from 2.9% to 3.1% — the fastest pace in more than a year.
There are many factors behind the upswing, including pricier gas, the impact of tariffs on goods, and stubborn inflation on the services side (especially housing).
Expect higher inflation on these items
Food prices rose by 24% between 2020 and 2024, said Billy Roberts, senior analyst for food and beverage at CoBank, which provides financial services to agribusinesses and rural firms.
In August, grocery prices jumped 0.6%, the highest monthly increase in nearly three years, according to BLS data. Economists expect the September gain to be more mellow.
Beef prices have risen dramatically in recent years as herds have shrunk amid prolonged drought.
Cocoa and coffee prices, which have been pushed higher by climate change stifling supply, now face further pressures from tariffs.
Residential electricity costs are on the rise, according to the US Energy Information Administration. The average price of electricity in America has increased 13% since 2022, with the cost of retail electricity expected to grow faster than the rate of inflation.
Why it's the only economic data the government is publishing
With most federal funds frozen during the ongoing government shutdown, which began on October 1, federal statistics agencies have stopped publishing economic data because they don’t have the means to collect all the necessary information.
The September Consumer Price Index report, set to be published Friday morning, is the one big exception. That’s because data from the report is needed for the government to meet statutory requirements to adjust Social Security payments for next year based on the cost of living.
For as long as the shutdown goes on, the public won’t have access to any other government-sourced economic data, often deemed the gold standard.
That makes things tricky for the data-dependent Federal Reserve, which kicks off its October monetary policy meeting next week. Central bankers won’t so easily be able to judge where interest rates should be to promote their dual mandate for stable prices and maximum employment.
