Will it impact the Fed, which meets next week on rates?
The inflation rate rose in September, although not as much as expected, while consumer sentiment dropped in October.
Two key reports released Friday continue to paint a mixed and uncertain economic picture.
Despite the government shutdown, which has put a hold on the release of federal economic data, the Consumer Price Index (CPI) was indeed released on Friday.
The Bureau of Labor Statistics (BLS) said this release allows the Social Security Administration to determine Social Security COLA (cost of living adjustments). “No other releases will be rescheduled or produced until the resumption of regular government services,” according to the BLS.
Inflation ticked up 0.3% last month, down from 0.4% in August, according to the September CPI. It was better than the 0.4% increase that economists predicted for September.
The 12-month inflation rate was 3.0%, up from 2,9% in August. However, it was better than the 3.1% estimates.
Core inflation, which excludes food and beverage prices, rose 0.2% in September, down from 0.3% in August and better than estimates of 0.3% for September. The 12-month core CPI rate came in at 3.0%, down from 3.1% in August and better than estimates of 3.1%.
Comerica expects rate cut next week
Inflation was kept in check by cooling shelter and used car prices, but that was offset by inflationary impacts from tariffs and shortages of immigrant workers, Comerica Bank Chief Economist Bill Adams said.
In year-over-year terms, September saw notable price increases that reflect the impact of tariffs and immigration-related labor shortages. Coffee is up 19% year-over-year, and motor vehicle repairs are up 12%. Gardening and lawncare service prices are up 14%, and care of “invalids and elderly” at home is up 12%,” Adams said.
Adams also noted that beef prices are up 15%, but consumer electronics have not been affected by tariffs, as smartphone prices dropped 15%.
Adams added that the Fed is more concerned about the job market, which is “at best holding steady and at worst slightly deteriorating since the shutdown began.”
Comerica forecasts the Fed to cut rates by 25 basis points at the FOMC meeting next week and do it again in December.
Rate Cuts Over the Last 12 Months
| Date | Action | Change (bps) | New target range (%) |
|---|---|---|---|
| Sep 17, 2025 | ↓ | −25 bps | 4.00 – 4.25 |
| Jul 30, 2025 | Hold | 0 | 4.25 – 4.50 |
| Jun 18, 2025 | Hold | 0 | 4.25 – 4.50 |
| May 7, 2025 | Hold | 0 | 4.25 – 4.50 |
| Mar 19, 2025 | Hold | 0 | 4.25 – 4.50 |
| Jan 29, 2025 | Hold | 0 | 4.25 – 4.50 |
| Dec 18, 2024 | ↓ | −25 bps | 4.25 – 4.50 |
| Nov 7, 2024 | ↓ | −25 bps | 4.50 – 4.75 |
| Sep 18, 2024 | ↓ | −50 bps | 4.75 – 5.00 |
Consumer sentiment drops
A non-government source of consumer sentiment was released on Friday as well, the University of Michigan’s Surveys of Consumers.
The October results shows that consumer sentiment continues to decline. In October, the overall index dropped to 53.6, down from 55.1 in September and well below the 70.4 score in October 2024. The 53.6 score is the lowest since May.
The survey of current economic conditions fell to 58.6, down from 60.4 in September. It is also 10% lower than it was a year ago.
The index of consumer expectations plummeted to 50.3, from 51.7 in September. It is down 32% from 74.1 in October 2024.
“Overall, consumers perceive few material changes in economic circumstances from last month; inflation and high prices remain at the forefront of consumers’ minds. There was little evidence this month that consumers connect the federal government shutdown to the economy,” Surveys of Consumers Director Joanne Hsu said.
