America’s inflation is back at 3%. That’s higher than normal but not out of control
By Alicia Wallace, CNN
(CNN) — The cost of living got even more expensive for Americans last month, with prices rising at the fastest pace since the start of the year.
Consumer prices rose 0.3% in September, which drove the annual rate of inflation from 2.9% to 3%, the highest it’s been since January, according to Bureau of Labor Statistics data released Friday.
Gas prices, which shot up 4.1% overall and 4.2% for regular unleaded fuel (both the largest monthly increases since August 2023), were the biggest culprit behind the monthly increase, BLS data shows.
Food prices rose at a more moderate pace than they did in August (a month when grocery prices leapt by the highest rate in nearly three years). And housing-related inflation also continued its lengthy slowdown.
Economists were expecting that inflation would continue to pick up speed, rising 0.4% for the month and 3.1% from the year before, according to FactSet estimates.
Excluding food and energy, which can be quite volatile, the core measure of CPI rose 0.2% in September, with an annual inflation rate settling out at 3%.
Although better than economists had expected, Friday’s inflation data is a disconcerting reminder that prices are still rising faster than they typically should.
“There’s a psychological milestone of being back at that 3% level again,” Heather Long, chief economist at Navy Federal Credit Union, said in an interview with CNN.
Due to inflation, the typical American household is spending $208 more a month in September to purchase the same goods and services as they were a year ago, and $1,043 more a month than they did at the start of 2021, coming out of the pandemic, new data from Moody’s Analytics showed.
The softer inflation reading for September gives a green light to a rate cut from the Federal Reserve, which has a policy meeting next week, wrote Christopher Rupkey, chief economist at FwdBonds.
However, Rupkey cautioned that the better-than-expected report might also be painting a rosier picture than actually exists.
“The immediate dangers from Trump 2.0 tariff policies have not yet fed through to inflation overall,” he wrote in a note to investors Friday. “The market will likely hold their applause, however, as one reason inflation is held in check may be due to the economic slowdown seen in many labor market indicators.”
Friday’s report provided further evidence that President Donald Trump’s steep import tariffs are causing certain goods prices to move higher. Categories such as apparel, home furnishings, footwear and appliances all continued to see price increases last month, and a closely watched inflation index (core goods excluding autos) is up 1.3% annually, which is the highest since August 2023.
However, the September report is somewhat unique in its own right: It’s the first major federal economic report released since the US government shut down on October 1.
September CPI, which was originally scheduled for release on October 15, is being belatedly published so that the government can meet deadlines to make cost of living adjustments for 2026 Social Security payments.
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CNN’s Matt Egan contributed to this report.
