US Retail Inflation Rises Less Than Expected, Keeping Fed On Track To Cut Rates

Underlying US inflation rose by less than expected in September, keeping the Federal Reserve on course to lower interest rates next week.

The core consumer price index, excluding the often volatile food and energy categories, increased 0.2% from August, according to Bureau of Labor Statistics data out Friday. That was the slowest pace in three months. On an annual basis, it advanced 3%.

The September CPI report was initially scheduled to come out on Oct. 15 but was delayed because of the ongoing federal government shutdown. While most BLS operations have ceased since the Oct. 1 closure, the agency recalled staff to prepare this release so the Social Security Administration could tally its annual cost-of-living adjustment.

BLS staff will only be available to take calls from the public on CPI until 12 p.m. in Washington due to the shutdown, the report said.

The lower-than-expected reading is a welcome surprise, especially for several Fed officials who are leery of cutting rates further. While the central bank was already widely expected to lower borrowing costs at its meeting next week, the report may help convince policymakers that they can do so again in December — especially in the absence of other official reports should the shutdown continue.