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- September CPI: Inflation comes in lower than expected but holds firm near 3%</p>
<p>Alexandra CanalOctober 24, 2025 at 8:34 PM</p>
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<p>Inflation held stubbornly around 3% in September, government data showed Friday, but came in slightly cooler than analysts expected across the board as investors continue to assess the Federal Reserve's path toward its 2% target.</p>
<p>The latest data from the Bureau of Labor Statistics showed the Consumer Price Index (CPI) rose 3% year over year in September, up from 2.9% in August but slightly below economists' expectations for a 3.1% increase. That marks the highest reading since May and remains above the 12-month average of 2.7%.</p>
<p>Month over month, prices rose 0.3%, below August's 0.4% rise and also lower than economists' expectations of a 0.4% monthly gain. The rise was driven in part by higher gasoline prices, which climbed 4.1% in September. Still, the year-over-year picture looks more moderate: Gasoline prices were down 0.5% from a year ago, while the broader energy commodities index slipped 0.4%.</p>
<p>"Core" inflation, which strips out volatile food and energy costs, rose 3% year over year in September, down from 3.1% in August and below economists' expectations. On a monthly basis, core prices increased 0.2%, easing from August's 0.3% gain, which was the strongest monthly rise in six months.</p>
<p>A person shops at a grocery store in Schaumburg, Ill., on Sept. 18, 2025. (AP Photo/Nam Y. Huh) ()</p>
<p>Friday's report was delayed by the ongoing government shutdown, now the second-longest shutdown in US history, with no end in sight. It marks the first major piece of federal economic data since the shutdown began.</p>
<p>RSM chief economist Joe Brusuelas called the report "a market positive story," noting, "it's looking better than what we initially expected." But he cautioned that data quality could deteriorate in the months ahead as the shutdown drags on.</p>
<p>"Remember this is likely to be the last solid quality report we get until probably early next spring because of the government shutdown," Brusuelas told Yahoo Finance. "The BLS is going to be imputing or rather guessing at a lot of the estimates that they're making... this in many respects is the last hard data that I'm going to trust probably until early next spring."</p>
<p>He added that inflation, while moderating for now, remains above target.</p>
<p>"Make no mistake about it — inflation's at 3% and it's likely to accelerate higher. It's well above the Fed's 2% rate, and the Fed's got a lot of heavy lifting to do. It's going to be probably a number of years, if ever, before we get back to 2%."</p>
<p>Despite still-stubborn prices in September, markets continue to expect the Fed will deliver a quarter-point cut at next week's policy meeting, according to the CME FedWatch tool.</p>
<p>Read more: How to protect your savings against inflation</p>
<p>Some signs of moderation</p>
<p>While the overall report showed inflation pressures easing, the details painted a mixed picture across key categories.</p>
<p>Food prices continued to edge higher, up 0.2% in September from the previous month, but have shown signs of moderating from earlier in the year.</p>
<p>Housing inflation also cooled further. The shelter index rose 0.2% after a 0.4% rise in August. Owners' equivalent rent, the hypothetical rent homeowners would pay for their own homes, climbed just 0.1%, the smallest monthly gain since early 2021.</p>
<p>Medical services posted a mild 0.2% increase after declining in August, while apparel prices rose 0.7%, signaling that tariff pass-through is starting to show up in categories like clothing and household furnishings, which climbed 0.4% last month.</p>
<p>Meanwhile, some relief came from auto-related costs. The motor vehicle insurance index fell 0.4% in September after being unchanged the prior month, offering a small break in one of the stickier service categories this year.</p>
<p>"Today's CPI report confirms inflation's slow, but steady descent," BlackRock chief investment and portfolio strategist Gargi Chaudhuri said. "Goods prices are firming again amid tariff pressures, but softer shelter and services readings show progress where it matters most. The disinflation trend is intact, keeping the Fed on course for a rate cut next week."</p>
<p>Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at [email protected].</p>
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