:max_bytes(150000):strip_icc()/GettyImages-2237236359-a0d1edf34ec44991a8cf236b44ad2f78.jpg "What To Expect In Wednesday’s Inflation Report")
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Key Takeaways
- The Consumer Price Index likely rose 3.1% over the year in September, according to forecasters.
- That would be the highest inflation in nearly a year and a half, which would underscore how tariffs have pushed up inflation that had been decelerating before President Donald Trump imposed double-digit import taxes.
- The Federal Reserve is likely to cut interest rates despite rising inflation, due to concern about the job market losing steam.
Inflation likely rose to a 17-month high in September as tariffs pushed up prices, forecasters say.
The Consumer Price Index report scheduled for release on Wednesday is likely to show that prices rose 3.1% over the year in December, according to the Bloomberg Financial consensus forecast, as quoted by Wells Fargo Securities. If the report aligns with expectations, it would be an increase from 2.9% in August and the highest 12-month inflation rate since May 2024.
Higher inflation would underscore the impact of President Donald Trump’s import taxes, which have steadily pushed prices up in recent months. The index’s year-over-year inflation measure has risen every month since April, when Trump announced double-digit tariffs on products from nearly every country in the world. Before that, inflation had been largely decelerating from its post-pandemic peak in 2022. By many measures, it was nearly back down to the Federal Reserve’s goal of a 2% annual rate.
What This Means For The Economy
Inflation accelerating for a fifth consecutive month would deal a setback to the Federal Reserve’s efforts to lower inflation, which had been on a downward trend before April.
Still, the expected uptick would not likely be steep enough to deter officials at the Federal Reserve from cutting interest rates later in October as widely expected. The Fed cut its benchmark fed funds rate by a quarter-point in September to prop up the ailing job market, as the Fed has grown more concerned with preventing unemployment than fighting inflation.
Despite higher prices, lower rent increases may keep the overall inflation rate from rising too much. “Core” inflation, which excludes volatile prices for food and energy, is expected to have risen 3.1% in September, unchanged from August.
“We expect goods inflation to stay elevated due to continued tariff pass-through, while an easing in primary shelter costs should help cool services inflation,” Wells Fargo economists Sarah House and Nicole Cervi wrote in a commentary.
The September CPI report could be especially noteworthy since it will be one of the few official pieces of economic data produced by the government’s statistical agencies during the shutdown that began Oct. 1. The Bureau of Labor Statistics brought back some of its furloughed workers to publish the report that was initially due out Oct. 15.
