Consumer Price Index — September Update
The September CPI report came in slightly cooler than expected, showing overall inflation rising 0.3% for the month, one tenth below forecasts. On a year-over-year basis, inflation ticked up from 2.9% to 3%, a touch softer than the market’s expectation of 3.1%. The biggest driver of the monthly gain was energy, which climbed 1.5%, fueled entirely by a 4.1% jump in gasoline prices.
The Core CPI, which excludes food and energy, increased by 0.2%, also one tenth below expectations. Year over year, Core inflation eased from 3.1% to 3%, another positive sign that inflation pressures continue to moderate.
The standout component continues to be shelter, which makes up 44.4% of the Core index. This category helped keep inflation in check, rising just 0.2% for the month. Within that, Owners’ Equivalent Rent (OER)—the largest subcomponent at 33% of Core—rose a modest 0.1%, far cooler than recent trends. This aligns with what we’ve been expecting: a gradual return of shelter data to more realistic levels, helping drive Core inflation lower.
Rent prices rose 0.2%, or roughly 2.4% annualized, now much closer to real-time rent tracking measures. Lodging away from home rose 1.3%, but we anticipate this will ease in coming months as hotel demand and pricing soften.
If we remove shelter entirely, everything else in Core CPI increased just 0.11% for the month and 1.48% year over year—a strong indication that inflation is cooling beneath the surface. While goods prices remain slightly higher due to temporary tariff effects, continued normalization in shelter and OER should keep inflation trending lower.