Consumer prices rose 0.3% in September, taking headline CPI from 2.9% to 3% year-over-year. Core prices rose 0.2%, taking core CPI down from 3.1% to 3%.
Both measures came in slightly lower than expected. In an environment in which the Fed has limited data to run on, we believe this print will help keep the central bank on track to continue cutting rates.
Energy prices push headline CPI up
The energy component of the index rose 1.5% in September (the fastest since December 2024), driven by a 4.1% rise in gasoline prices. The other relatively volatile category, food, rose 0.2%, with four of the six major grocery food groups posting price increases
Figure 1: Energy helps nudge headline CPI higher
Source: Bureau of Labor Statistics, Macrobond, Insight, October 2025
Core goods inflation was relatively benign at 0.2% in September, following 0.3% in July and August. Insight’s synthetic tariff-sensitive goods index rose 0.3% in September1 with small categories such as apparel, furniture and bedding, and sports vehicles showing some significant price rises.
Figure 2: Tariffs are still helping to push core goods inflation up modestly
Source: Bureau of Labor Statistics, Macrobond, Insight, October 2025
Core services categories continue gradual moderation
The stubborn core services components continued to trend sideways to slightly lower.
Shelter (the largest component of the index) rose 0.2% in September, leaving it unchanged year-over-year at 3.6% (Figure 3). We expect the measure to continue easing gradually in line with private rental indices.
Elsewhere, “supercore” services (which exclude food, energy and shelter categories) also continued to trend sideways, although transportation services notably eased, driven by a -0.4% fall motor vehicle insurance prices in September.
Figure 3: Core services are still easing gradually
Source: Bureau of Labor Statistics, Macrobond, Insight, October 2025
Conclusion: A relatively benign CPI price helps justify continued rate cuts
This CPI report takes on higher importance than usual for the Fed, arriving during a period in which the US shutdown has suspended other key data releases.
Looking ahead, the majority of the price quotes for the October CPI report will likely be missing, even if the government were to swiftly reopen, raising questions about its publication.
The lack of available data will complicate the Fed’s efforts to calibrate monetary policy. However, this report will offer some comfort that core services components continue to moderate. We expect the central bank to “look through” tariff inflation as long as it appears to be transitory. Given challenges to the labor market, we expect the Fed will be minded to continue cutting rates consistently over the final two meetings of the year and into Q1 2026.
