US consumer prices increase less than expected in September

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NEW YORK (Reuters) -U.S. consumer prices rose slightly less than expected in September, preserving market expectations the Federal Reserve will cut interest rates at its policy meeting next week.

The Consumer Price Index (CPI) rose 0.3% last month after climbing 0.4% in August, the Labor Department’s Bureau of Labor Statistics said on Friday. In the 12 months through September, the CPI increased 3.0% after advancing 2.9% in August.

Economists polled by Reuters had forecast the CPI increasing 0.4% and rising 3.1% year-on-year.

Excluding the volatile food and energy components, the CPI gained 0.2% after rising 0.3% in August. The so-called core CPI increased 3.0% year-on-year after rising 3.1% in August.

The report was delayed due to the government shutdown but was eventually published in order to help the Social Security Administration calculate its 2026 cost-of-living adjustment for millions of retirees and other benefits recipients.

MARKET REACTION:

STOCKS: S&P 500 E-mini futures climbed and were last up 38.5 points, or 0.57%.

BONDS: U.S. Treasury yields fell and the 10-year yield was last down 0.8 basis point to 3.982% and the two-year yield fell 2.7 basis points to 3.455%.

FOREX: The dollar index weakened and was last off 0.09% to 98.85.

COMMENTS:

MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN CAPITAL MARKETS, NEW YORK:

“The headline was a bit softer than expected. The dollar was sold on the news, even though the market had nearly 100% confidence before the report that the Fed would cut rates, not only next week, but in December.”

“My guess would be that the dollar firms up again as the session progresses. Because the market has priced in the Fed cuts, this kneejerk pushback in the dollar I don’t think is going to be sustained.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“These numbers reveal nothing new. Inflation remains sticky. The good news is that the core rate only rose 0.2% which was in line with what we were looking for, and on a year-to-year basis 3%.”

“Headline inflation was in line with consensus, but the year-to-year was a little bit higher. This tells us that the tariff inflation continues to weigh on the consumer’s pocketbook and that inflation remains sticky, although it’s not running wild and that’s a good thing.”

“In terms of the Fed, we’re looking at a 25 basis point cut next week and they will have enough time from now to December to evaluate the inflation data that is coming in and even if it’s delayed.”

“But it’s quite clear that the Fed has indicated that for now they’ve abandoned the inflation fight to prop up the jobs market from deteriorating any further, which means further rate cuts ahead.”

JOE SALUZZI, CO-MANAGER OF TRADING, THEMIS TRADING, CHATHAM, NEW JERSEY

“It was a good number and, I think, considering that we haven’t had anything over the past two or three weeks, people were getting a little anxious as to what this could have been. So you’ve finally got something and it kind of confirms everybody’s theory as to what’s going on. Inflation is relatively tame, right? And you’ve still got a problem in the jobs market, there’s no question about it, which I think is why the Fed is going to continue doing what they’re doing.”

“It looks around 88% now for two more cuts this year. So, it’s gonna happen. Well, the market likes that. The S&P rallied pretty quickly. We got almost about seven tenths of 1% right now on the upside. So, overall, it’s good. It keeps the fuel in the rally. It could have went the other way, right? Had we gotten a really hot number, then you could have had a potential big problem here. But, overall, I’d say the market is really liking this one.”

(Compiled by the Global Finance & Markets Breaking News team)