US Inflation Cools in September, Strengthening Bets on a Fed Rate Cut

US consumer prices rose less than expected in September, reinforcing signs that inflation is gradually easing and increasing expectations for a Federal Reserve rate cut next month. The Consumer Price Index climbed 0.2% from August, below the 0.3% forecast, while the annual inflation rate held steady at 2.4%, according to the latest data.

Core CPI, which strips out volatile food and energy prices, increased 0.3% on the month and 3.3% from a year earlier. The figures suggest that underlying price pressures are cooling, even as some categories remain sticky.

The softer-than-anticipated report gave markets a lift, with stock futures moving higher as investors priced in a greater chance of policy easing at the Fed’s November meeting. A rate cut would mark another step in the central bank’s effort to balance slowing inflation with signs of a more moderate economic backdrop.

While the latest reading does not signal a return to pre-pandemic price stability, it does indicate that inflation is moving in the right direction. For policymakers, the data may provide additional room to begin lowering borrowing costs without immediately risking a renewed surge in prices.