U.S. Consumer Price Index (September 2025)

Headline and core inflation rise 3% annualized in September 

• The Consumer Price Index (CPI) rose 0.3% month-on-month (m/m) in September, a tick below the consensus forecast in Bloomberg. On a twelve-month basis, CPI rose to 3.0% (from 2.9% the month prior). 
  
  • Higher prices at the pump (+4.1% m/m) were partly responsible for the sustained strength in headline inflation, while food prices (+0.2% m/m) moderated thanks to a slowing in grocery costs and 'food away from home'.  
• Excluding food and energy, core inflation rose 0.2% m/m, a step down from the 0.3% m/m readings in the two prior months and a tick below the consensus forecast. The twelve-month change was up 3.0%, while the three-month annualized rose by a slightly faster 3.6%. 
• Services inflation moderated in September – rising 0.20% m/m – following a hotter 0.35% m/m gain the month prior. The deceleration was largely led by a cooling in primary shelter costs (+0.15% m/m vs 0.4% m/m in August), which grew at their slowest monthly rate since January 2021. Price growth for non-housing services (+0.3% m/m vs. +0.4% m/m in August) also eased but are still running just under 5% annualized over the last three months. 
  
  • Higher travel costs (+1.8% m/m) remain a notable contributor to the sustained strength in non-housing services, thanks to a further uptick in airfares (+2.7% m/m) and hotel costs (+1.8% m/m). Price growth for recreational services (+0.4% m/m) also accelerated on the month. 
• Tariff passthrough continued to materialize in core goods prices, which were up 0.2% m/m and would have been even larger if not for the pullback in used vehicle prices (-0.4% m/m) and educational goods (-0.8% m/m). Price gains were most notable in apparel (+0.7% m/m), appliances (+0.5% m/m), and recreational commodities (+0.4% m/m). 
• With the shutdown ongoing, this morning's CPI release was done so that the government could meet its statutory requirements in adjusting Social Security payments for next year, which are benchmarked to Q3 CPI data. 
  
  • Because the Bureau of Labor Statistics conducted the September CPI survey ahead of the government shutdown, there are no concerns with data quality. 
  • However, collection rates could very well be impacted for the October survey, given that data gathering is still suspended with the shutdown ongoing. At a minimum, this suggests there could be issues with data quality in the next release, and the longer the shutdown drags on, the greater the risk that the October report is skipped entirely.

Key Implications

• September's inflation report came in a bit softer than expected, thanks to a sharp cooling in primary shelter costs. Elsewhere, there were plenty of signs to suggest that elevated inflationary pressures are likely to persist in months ahead. Tariff passthrough continued to mount, with 75% of goods categories experiencing price gains last month (up from 67% in August). Meanwhile, price growth for non-housing services remained firm, particularly in categories tied to discretionary consumer spending. 
• With the softening labor market becoming a more pointed concern for policymakers, we don't feel that today's elevated inflationary pressures will deter the FOMC from delivering on another quarter-point rate cut next week. However, hotter readings on subsequent inflation prints could have implications for future decisions, particularly given the growing divide among FOMC members. For now, markets are still priced for another 50 basis points of easing by year-end – a view that aligns to our forecast. 

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