The Commerce Department reported that prices rose just 2.1% in September from a year earlier, down from a 2.3% rise in August. That is barely above the Fed's 2%
A shopper checks out at a cash register in a grocery store in Glenview, Ill., Sunday, Oct. 27, 2024.
Still, for the past six months, core inflation has declined to a 2.3% annual rate, down from 2.5% in August. And economists still expect the Fed to cut its key rate by a quarter-point when it meets next week.Pay bumps outpace price increases as inflation slows Though faster wage growth provides a boost for workers, it can also fuel inflation if companies pass on their higher labor costs to consumers by raising prices.
Thursday's report also showed that Americans remain confident enough in their finances to keep shopping: Spending jumped 0.5% from August to September, which helped the economy expand at a healthy clip in the July-September quarter. Inflation peaked at 7.1% in June 2022 after the economy had accelerated out of the pandemic recession at a time of severe shortages of parts and labor, according to the gauge released Thursday, called the personal consumption expenditures price index. Inflation has steadily cooled over the past two years after supply chains recovered from the pandemic disruptions and the Fed jacked up its key interest rate to a four-decade high, depressing home sales and auto purchases.
Chair Jerome Powell signaled in late August that the Fed is increasingly confident that inflation is coming under control. And hiring weakened in July and August. Those trends led the Fed to cut its key rate by an outsize half-point last month. With inflation continuing to slow, the Fed is expected to further reduce its rate by a quarter-point in November and likely by another quarter-point in December.
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