Consumer Price Index inflation data set for release on Thursday is likely to show that price increases were nearly back to normal in September, the latest evidence that they are coming under control after years of proving painfully quick.
The report is expected to show that overall inflation was 2.3 percent on an annual basis, down from 2.5 percent previously. And after stripping out food and fuel costs, which can be volatile from month to month, a “core” inflation measure is expected to hold steady at 3.2 percent.
The overall inflation index has been cooling substantially from a peak of 9.1 percent in the summer of 2022. And both this index and a related measure — the Federal Reserve’s preferred Personal Consumption Expenditures index — have been creeping closer to the 2 percent annual rate that the central bank aims for over time.
Recent progress on inflation has been welcome news for the Fed, and has allowed officials to begin dialing back how much they are restraining the economy. Policymakers cut interest rates in September for the first time in more than four years, lowering them by an unusually large half percentage point.
While recent data have suggested that both economic growth and the job market are holding up, Fed policymakers have signaled that they expect to lower interest rates further as inflation cools. They projected in September that they would make two more quarter-point rate cuts this year.
“I don’t want to see the economy weaken,” John C. Williams, the president of the Federal Reserve Bank of New York, said in an interview with The Financial Times this week. “I want to maintain the strength that we see in the economy and in the labor market.”
That inflation is falling and interest rates are coming down could be good news for Democrats ahead of the election, bringing relief to consumers who have smarted from years of rising prices.
But inflation could still be in for some bumps in coming months. Used car prices are climbing after months of moderation, and while officials are still expecting a cool-down in housing inflation, it has been slow to fully materialize.
Given that, and the fact that core inflation remains above the Fed’s target, some officials at the central bank have taken a warier stance toward rate cuts. They don’t want to lower borrowing costs too much too quickly, making it harder to fully snuff out price increases in the longer run.
“We have not yet achieved our inflation goal,” Michelle Bowman, a Fed governor, wrote explaining why she voted against September’s big rate cut in favor of a smaller move.
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