Inflation increased by 2.4% over the 12-month period ending in September, marking the smallest annual rise in more than three years, according to the latest Consumer Price Index (CPI) report from the U.S. Bureau of Labor Statistics.
The report attributes this slowdown primarily to a significant decrease in gasoline prices, which fell by 15.3%. Despite this, core inflation, excluding volatile energy and food prices, rose by 3.3% over the same period. The shelter index saw a notable increase of 4.9%, making up over 65% of the total annual increase.
The CPI highlighted other areas with notable price increases over the past year: motor vehicle insurance surged by 16.3%, medical care went up by 3.3%, personal care increased by 2.5%, and apparel rose by 1.8%.
On a monthly basis, seasonally adjusted data shows that the CPI for all items rose by 0.2% in September, consistent with July and August figures. Shelter costs also grew by 0.2% during September, while food prices increased by 0.4%. These two categories contributed more than 75% to the monthly all-items increase.
Energy prices continued their downward trend with a decline of 1.9% in September following a drop of 0.8% in August. Meanwhile, the core index for all items less food and energy went up by 0.3% for September, mirroring August's increase.
The report also noted price hikes in specific sectors for September: shelter rose by 0.2%, motor vehicle insurance climbed by 1.2%, medical care increased by 0.7%, apparel grew by 1.1%, and airline fares jumped by 3.2%.
This CPI data will influence the Federal Reserve Board's decision on interest rates next month, as it considers labor market trends and other economic indicators alongside inflation figures.
"The central bank announced its first interest rate cut in four years on Sept. 18," reflecting inflation's movement toward "the Fed’s 2% target goal."
Inflation had surged during the pandemic to an average of around 8% in 2022, leading to a series of interest rate hikes—11 times between March 2022 and July 2023—to temper economic activity.
Following a period where interest rates were held at a peak not seen for over two decades, the Fed reduced its federal funds target rate by half a percentage point to reach a level of approximately "4.875%" in September.
