A key measure of consumer inflation rose a touch faster than expected in September, potentially adding a fresh wrinkle to the Federal Reserve’s plan to cut U.S. interest rates twice more this year.
A closely followed inflation gauge that omits food and energy rose 0.3% for the second month in a row, the government reported Thursday.
Wall Street analysts had forecast a smaller 0.2% reading in the “core” component of the consumer price index.
The increase in the core rate in the past year, meanwhile, edged up to 3.3% from 3.2% in the prior month. It was the first increase in a year and a half.
That’s a sign inflation is still sticky in some major parts of the economy.
The overall increase in the consumer price index, meanwhile, rose 0.2% last month. That was also a tick higher than expected.
The yearly rate of inflation slowed to 2.4% from 2.5% and touched the lowest level since February 2021.
The Fed views the core CPI as a better predictor of future inflation trends, however. Food and gas prices can bounce sharply up and down in the short run and exaggerate the rate of inflation.
Still, the Fed is widely expected to keep cutting interest rates even if inflation remains at current levels. What's less clear is whether the Fed would "pause" in November to wait for more data or reduce rates again.
The central bank is more worried about the weakening labor market and doesn’t want to see the unemployment rate rise much further.
"Fed officials see less upside risk to inflation and do not wish the jobs market to soften any further," Citibank economists wrote in a note to clients before the CPI report.
