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US inflation climbed to 3% in September — the first time it has reached that level since January — but remained lower than many economists had anticipated.
According to the US Labour Department, consumer prices rose 3% over the year to September, up from 2.9% in August. Analysts had predicted a 3.1% increase, warning that new trade tariffs could heighten inflationary pressures.
The data, the first major release since the government shutdown earlier this month, came just days before the Federal Reserve is due to decide on its next interest rate cut. The softer figures strengthened expectations that the Fed will again reduce borrowing costs.
Olu Sonola, Head of US Economic Research at Fitch Ratings, said the figures would likely be met with “a sigh of relief” by the Fed.
“The tariff pass-through remains muted,” he noted. “As strange as it sounds, the Fed will be comfortable with inflation holding around 3% for now.”
The US central bank typically raises rates to cool price growth or lowers them to stimulate the economy and protect jobs.
But it currently faces a difficult balance, with hiring slowing even as inflation remains above its 2% target — partly due to tariffs introduced by President Trump’s administration.
Prices for imported goods such as furniture rose 3.8% in the year to September and 0.9% month-on-month. Costs for services, including airfares, childcare, and haircuts, also continued to increase.
Still, the inflation rise was less steep than expected, as many companies absorbed the impact of higher import costs rather than passing them fully on to consumers.
Monthly inflation eased slightly to 0.3% in September, compared with 0.4% in August. Analysts at Wells Fargo said the softer data almost guaranteed a rate cut next week, though they cautioned that “the Fed cannot yet declare victory.”
The Labour Department temporarily recalled furloughed staff to produce the report, which is also used to determine Social Security cost-of-living adjustments.
The Social Security Administration announced a 2.8% rise in payments for next year to reflect inflationary trends.
Most categories recorded price increases: grocery prices rose 2.7% year on year, beef and veal prices surged 14%, and coffee prices climbed nearly 19% despite a slight monthly dip.
Petrol prices were the main contributor to inflation in September, jumping 4.1% over the month, though they are still down 0.5% compared with last year.
Housing costs showed signs of easing. Rents rose 3.5% in the year to September, unchanged from August, while owners’ equivalent rent increased 3.8% year-on-year but just 0.1% monthly — the smallest rise since January 2021, according to the Labour Department.
