Inflation Slows in September, Keeping Door Open for Trump’s Next Rate Cut

Prices across America rose slightly less than expected in September, offering welcome relief for households still battling the cost of living. According to the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) increased just 0.3% for the month — bringing the annual inflation rate to 3%.

Economists had projected a bigger jump of 0.4% for the month and 3.1% year-over-year. The data suggests that inflation pressures are easing, potentially giving the Federal Reserve under President Trump’s administration more room to cut interest rates next week.

Inflation Cools, Even as Gas Prices Spike

While gasoline prices jumped 4.1%, most other categories remained stable.

• Food prices increased just 0.2%, with groceries like meat, poultry, fish, and eggs up 5.2% year-over-year.
• Nonalcoholic beverages rose 5.3%, while electricity costs climbed 5.1% and natural gas surged 11.7% over the past year.
• Gasoline, however, actually fell 0.5% compared to last year.

Shelter costs — which make up about one-third of the CPI — rose 0.2% in September and are up 3.6% annually, showing signs of cooling after months of steep increases.

New vehicle prices ticked up 0.8%, while used cars and trucks fell 0.4%, continuing their recent slide.

Market Reaction: Calm Confidence

Wall Street reacted positively. Stock futures gained, and Treasury yields dipped, signaling investor confidence that inflation is no longer spiraling.

David Russell of TradeStation noted, “Inflation might not be slowing rapidly, but it’s not surprising anyone anymore.”

That steady sentiment is seen as good news for retirees, homeowners, and small investors alike — all groups that benefit from lower borrowing costs and a stronger dollar.

Tariffs and “Made in America” Effects

Interestingly, the data shows only limited effects from President Trump’s tariffs so far.
Economist James Knightley of ING said many American companies have shifted production to lower-tariff nations, easing pressure on prices.

“Businesses are adapting faster than expected,” Knightley said. “So far, tariffs have created only a modest, one-time bump in prices rather than long-term inflation.”

This adjustment supports the administration’s argument that tariffs can protect American jobs without triggering runaway inflation.

The Final Data Before the Fed’s Decision

This CPI report is one of the few economic indicators released during the ongoing government shutdown, as the data is required for determining Social Security cost-of-living adjustments (COLA).

It’s also the last major report the Federal Reserve will see before making its next interest rate decision. With inflation near 3% and the Fed’s goal at 2%, analysts say another quarter-point rate cut next week is nearly certain.

Market traders are also betting on another cut in December, although the longer-term outlook remains uncertain.

What It Means for Americans

For everyday Americans — especially seniors on fixed incomes — this cooling inflation offers a bit of breathing room. While energy and food prices remain elevated, slower growth in housing and core goods could mean more stability heading into winter.

As one market strategist put it, “The Fed will stay on track to defend jobs and protect growth, even with inflation slightly above its target.”

President Trump has repeatedly said inflation is “no longer a problem” and has pushed the Fed to cut rates more aggressively to fuel economic expansion. With the latest numbers in hand, the case for another rate cut is now stronger than ever.

Bottom Line:
Inflation cooled in September, giving Washington fresh justification for another interest rate cut. For millions of Americans still feeling the squeeze, that could mean lower borrowing costs, steadier markets, and renewed confidence in the Trump economy.