Consumer prices climbed at an 3.7% annual pace in September, matching the rate set in August as shelter and other services prices remained strong. But growth in core prices, which strips out the volatile food and energy categories, decelerated from August to a 4.1% annual pace, from 4.3% previously.
Economists forecast the consumer price index climbed at a 3.6% annual pace in September, consensus expectations from FactSet show, marking a tick down from the 3.7% pace in August. That would mark the first month since June that headline price growth slowed. On its surface, a September inflation report in line with expectations would look like welcome news for the Fed, with the annual pace of both core and headline inflation decelerating from the previous month. But the underlying details could present something of a mixed picture, given the risk that a cooling headline inflation number could end up masking worrisome heat below the surface.
Core services excluding housing—a measure the central bank has been especially focused on in recent months—could remain similarly strong, with Citi economists forecasting a 0.5% climb during the month of September. The U.S. economy, they wrote, is “exiting the inflation soft-patch.” They warn, too, that the path forward for further inflation declines after September is only growing more difficult. Used car prices may be finished declining, and other goods prices are more or less holding steady.