Fed’s Inflation Measure Shows Limited Change in September

The Federal Reserve’s key inflation indicator remained relatively stable in September, potentially influencing the anticipated rate cut by the central bank next week.

The Department of Commerce reported a 0.3% increase in prices from August to September. Interestingly, this report, which was initially delayed by five weeks due to a government shutdown, echoed the previous month’s figures.

This slight rise mirrors what was observed the month before.

If we exclude the volatile food and energy sectors, core prices saw a 0.2% increase in September, maintaining the same pace as August. If this trend continues, we might inch closer to the Fed’s 2% inflation target over the year.

Year-over-year, overall prices increased by 2.8%, which is a minor uptick from the 2.7% rise reported in August. Similarly, core prices also rose by 2.8% compared to last year, though this shows a slight decrease from the previous 2.9% growth.

The data suggests that core inflation was quite subdued in September, bolstering arguments for a potential cut in the Fed’s primary interest rate during their upcoming meeting starting Tuesday.

However, inflation remains above the central bank’s 2% goal, partially due to tariffs set during the Trump administration. Despite this, many Fed officials express that sluggish employment growth, modest overall economic performance, and slowing wage increases might lead to reduced price hikes in the near future.

The Fed’s upcoming decisions won’t be easy. Typically, their strategy involves maintaining elevated interest rates to address inflation.

There’s also growing concern about rising unemployment and the broader economic stagnation. The underlying hope is that lower rates could spur borrowing and, in turn, stimulate the economy.

Additionally, Friday’s report indicated a slower growth in consumer spending for September, rising by 0.3%—down from the 0.5% increase in August. Even so, it suggests that Americans are still keen to spend despite high prices and a lagging job market.

In recent weeks, there seems to be a sentiment amongst Americans to continue spending. The upcoming Black Friday and Thanksgiving weekend might further drive growth in the fourth quarter.

According to Adobe Analytics, online spending saw a year-over-year rise of 7.7% during the five days following Thanksgiving.

On a positive note, income has shown consistent growth, inching up by 0.4% in September.