NEWS AND INSIGHTS | INSIGHTS

CIO Notebook: September Core CPI Comes in Late but Light

October 24, 2025
Shannon Saccocia, CFA, Chief Investment Officer - Wealth

Despite missing payroll data due to the shutdown, slowing labor indicators plus cooler CPI support expectations for a 25 bps Fed rate cut next week, with additional cuts in December and early 2026 now likely.

Anticipation was high coming into today’s CPI print as the U.S. government shutdown continues to delay the release of key economic data points. Slated to be published originally on October 10th, U.S. core CPI was cooler than expected for the month of September, up +0.2% month-over-month (MoM) and up +3.0% year-over-year (YoY) versus consensus expectations for +0.3% and +3.1%, respectively. Headline CPI was lighter than consensus too, up +0.3% MoM versus the +0.4% estimate and up +3.0% YoY versus the 3.1% estimate. Headline inflation was driven in large part by the seasonal adjustment to gasoline prices, up +4.1%, while food prices grew by only +0.2% versus +0.5% in August.

Turning to core CPI, evidence of a long-awaited moderation in shelter prices was noteworthy, up only +0.2% MoM. Underlying the monthly gain was an increase in owners’ equivalent rent of only +0.1% while rents were higher by +0.2%. While still up +3.6% on a YoY basis, shelter prices are likely to continue to moderate, at least over the next several quarters, as housing inventories increase. In fact, the number of U.S. home sellers has recently exceeded home buyers for the first time since 2018. The moderation in housing costs contributed to a more benign services print overall, as services prices in aggregate grew by only +0.2% in the month. In addition to the improvement in shelter prices, motor vehicle insurance declined in the month, down -0.4% from August, while airfare inflation moderated from +5.9% in August to +2.7% in September. Services inflation moderation is helping to offset modest price increases in goods, likely attributable to the impact of tariffs. Apparel prices rose +0.7% in September up from +0.5% while furniture and bedding were up +0.9% MoM, and appliance prices were higher by +0.8%.

Today’s print does little to change expectations for the upcoming Fed meeting on October 29th. Granted, we still do not have the September non-farm payrolls report due to the shutdown, however, we believe that secondary and tertiary data point to a still slowing pace of payroll growth. Coupling that narrative with today’s inflation reading, we believe that the Fed will cut rates by 0.25% next week and likely telegraph their openness to further cuts in December and into the first quarter of 2026. Equity and fixed income performance in the early session are reflecting these expectations, with stocks higher, and the short end of the U.S. Treasury close lower.

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