Chairman Powell says the U.S. economy may be on a “more solid trajectory than expected”
Although the U.S. labor market remains mired in a downturn with low hiring and layoffs through September, the overall economy “may be on a somewhat stronger trajectory than expected,” Federal Reserve Chairman Jerome Powell said Tuesday.
Inflation rose again in September, the job market showed signs of cooling and prices continued to rise as consumers headed into the holiday season.
According to the Labor Department’s Consumer Price Index, which measures the cost of goods and services across the country, consumer prices rose 3% from a year ago, up slightly from 2.9% in August.
Cost increased by 0.3 on a monthly basis% After rising 0.4% in August.
Price increases were driven by increases in gasoline and energy prices, which rose 4.1% and 1.5%, respectively, over the month. Prices for shelter, airfare, recreation, home furnishings and operating costs, and clothing all rose. Prices for auto insurance, used cars and trucks, and telecommunications products and services fell in September.
“Tariffs continue to push up commodity prices, with clothing, furniture and personal goods prices all registering significant increases, and pass-throughs are widening,” Michael Pearce, deputy chief U.S. economist at Oxford Economics, said in an Oct. 24 note.
“Assuming tariffs do not rise significantly going forward, the temporary boost in commodity prices from tariffs and a weaker dollar will start to fade next year,” he added.
Some economists said the figure was not enough to prevent the U.S. Federal Reserve from cutting interest rates next month.
What is the core inflation rate in the United States?
Core prices, which exclude volatile food and energy costs, rose 0.2%, following a 0.3% rise in the previous month. This increased the annual core inflation rate to 3%.
Airfares rose 2.7%, following a 5.9% rise in August. Apparel costs rose 0.7%, and personal care, recreation, home equipment and business indexes all rose 0.4%.
The economic impact of the ongoing government shutdown has not yet been fully felt, said Stephen Cates, a financial analyst at Bankrate. The Bureau of Labor Statistics has suspended data collection for October due to a lack of funding.
“Federal job cuts and lack of back pay will constrain spending and worsen working conditions, especially in the most affected rural areas,” Cates said in an Oct. 21 memo. “The longer the shutdown lasts, the bigger our blind spots will be regarding the current economic situation.”
What is the 2026 Social Security COLA Adjustment?
The Labor Department’s employment report was delayed due to the ongoing shutdown, but the consumer price index received special attention because it was needed to calculate the Social Security cost of living adjustment (COLA).
The Social Security Administration announced a 2.8% adjustment in 2026, which is larger than the 2.5% increase that beneficiaries will receive in 2025.
Will the Fed cut rates in October?
Federal Reserve Chairman Jerome Powell said earlier this month that there is no “risk-free” path to monetary policy as the labor market cools and inflation remains above the Fed’s 2% target.
Although the situation is unlikely to change, a rise in prices in September could complicate the central bank’s interest rate decisions at the end of the month.
Fed policymakers are weighing the dual mandate of keeping prices stable and maximizing employment after months of weaker-than-expected jobs data. Uncertainty is further heightened by delays in the release of the September jobs report, leaving officials with less data than usual to guide their decisions.
Futures markets are predicting further quarter-point rate cuts in October and December, following the Fed’s quarter-point rate cut in September.
“Despite the lack of labor market data due to the government shutdown, this weaker-than-expected CPI report should give confidence to the Fed, which already appears leaning toward further rate cuts in October and December,” Cates said in a separate note on Oct. 24. “The latest inflation numbers strengthen the case that continued easing is appropriate given known conditions in the labor market.”
Is gasoline getting cheaper?
Gasoline prices rose 4.1% in September, but have fallen 0.5% over the past year. The average price of regular unleaded was $3.07 per gallon as of Oct. 23, down from $3.17 last month and $3.16 a year ago, according to AAA.
Retail gas prices in the U.S. have fallen this year as oil-producing group OPEC+ ramps up production and U.S. crude oil production surges to record levels.
Are rents going up or down?
Rent increased by 0.2% in September, following a 0.3% increase in the previous month. As a result, the annual growth rate has been reduced from 3.6% to 3.4%.
The annual rent increase for single-family homes rose 1.4% in August, the slowest increase in more than 15 years, according to real estate information, analytics and data company Kotality.
Are food prices still going up?
The eating-at-home index, or grocery costs, rose 0.3%, following a 0.6% rise in August.
The index for meat, poultry, fish and eggs rose 0.3%, following a 1% rise in the previous month. In particular, beef prices rose again after rising in August. Earlier this month, President Donald Trump announced plans to import more beef from Argentina as domestic prices hit record highs, a proposal that drew criticism from some Republicans in Congress and that cattle producer groups said would ease the burden on U.S. ranchers..
Other essential goods also rose in price, with prices for cereals, bakery products and non-alcoholic drinks all rising 0.7% in September.
Prices of some products fell, with dairy products prices down 0.5% and cheese products prices down 0.7%.
Household food prices rose 0.1%.
This story has been updated to add more information.
Contact Rachel Barber rbarber@usatoday.com X Follow her at @rachelbarber_
