Prices that people pay for a variety of goods and services rose less than expected in September, according to a Bureau of Labor Statistics report Friday that keeps the door wide open for another interest rate cut next week.
The consumer price index showed a 0.3% increase on the month, putting the annual inflation rate at 3%. Economists surveyed by Dow Jones had been looking for readings of 0.4% and 3.1%, respectively. The annual rate reflected a 0.1 percentage point uptick from August.
Excluding food and energy, core CPI showed a 0.2% monthly gain and an annual rate also at 3%, compared with estimates of 0.3% and 3.1%, respectively. Core CPI on a monthly basis had posted 0.3% gains in both July and August.
The CPI reading is the only official economic data allowed to be released during the government shutdown.
“Like an oasis slaking the thirst of a weary desert traveler, today’s CPI number offered investors the first tidbit of information from the barren wasteland of government data that has existed since the shutdown started Oct 1,” wrote John Kerschner, global head of securitized products at Janus Henderson. “Investors were not disappointed. Inflation came in softer than expected, leading to a tepid bond market rally, and ensuring that the Fed will cut rates at next week’s Open Market Committee meeting.”
A 4.1% jump in gasoline prices was the largest contributor to a report that otherwise showed inflation pressures fairly muted. Food prices saw a 0.2% increase. Commodity prices overall rose 0.5%. On an annual basis, energy was up 2.8% and food rose 3.1%.
Within the food index, prices for meat, poultry, fish and eggs surged 5.2% in the past year, while nonalcoholic beverages increased 5.3%. In energy, while prices pushed higher for electricity, up 5.1%, and natural gas, up 11.7%, over the past year, gasoline prices actually fell 0.5% during the period.
New vehicles saw a 0.8% increase, but used car and truck prices fell 0.4%.
“This report will clearly keep the Fed on track to cut rates,” said Art Hogan, chief market strategist at B. Riley Wealth. “The Fed has been clear that they are more focused on the softening labor data and will continue to defend their full employment mandate, even with core CPI well above their 2% target.”
Markets are pricing in a near-certainty that the central bank lowers its benchmark overnight borrowing rate by a quarter percentage point from its current target range of 4%-4.25%. Traders also are anticipating another cut in December.