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US inflation fell to 2.4 per cent in September, as the Federal Reserve considers cutting interest rates again at its next meeting in November.
The figure was below August’s 2.5 per cent annual increase but above economists’ expectations of 2.3 per cent.
The latest consumer price index report, the last before the November 5 presidential election, marked the sixth consecutive month the annual headline rate has fallen.
However, once volatile items such as food and energy were stripped out, “core” inflation rose faster than expected, up 3.3 per cent in the year to September.
That compared with the 3.2 per cent increase registered in August.
Although the inflation figures were slightly above market expectations, investors bet they were not sufficiently high to deter the Fed from lowering interest rates next month.
Markets were pricing a roughly 90 per cent change of a quarter-point cut in November following the data, compared with 80 per cent beforehand. The interest rate-sensitive two-year Treasury yield, which moves inversely to prices, edged marginally lower to 4.02 per cent.
Jobless data on Thursday also exceeded economists’ expectations. The number of Americans filing for unemployment insurance jumped to 258,000, almost 30,000 more than the forecast figure and the highest weekly increase since August 2023.
The latest figures present a mixed picture of the world’s largest economy just weeks before voting closes. Vice-president and Democratic nominee Kamala Harris has struggled to overcome voters’ discontent about rising costs in her bid for the White House.
Harris has hoped that a more benign economic backdrop of solid growth and falling interest rates will bolster her chances against Republican nominee Donald Trump.
US central bankers lowered borrowing costs by a larger-than-usual half-point last month and will be scrutinising the data as they wrestle with how quickly to lower interest rates to a “neutral” level that no longer inhibits economic growth.
Month-on-month headline inflation remained at 0.2 per cent for September, the same figure as the previous two months, overwhelmingly because of price rises for food and housing.
However, energy prices fell 1.9 per cent during the month.
The decline in inflation from its 2022 peak of 9.1 per cent has so far not triggered a significant weakening of the labour market, surprising many economists.
Last week’s US jobs report showed that businesses added 254,000 positions in September, far outstripping expectations. The unemployment rate fell to 4.1 per cent after several months of increases.
This week, New York Fed president John Williams told the Financial Times that monetary policy was “well positioned” to pull off a so-called soft landing following the half-point cut, as inflation eases and the economy keeps growing.
Williams said Fed officials’ projections released last month, which indicated a half-point worth of cuts to come over the two remaining meetings this year, were a “very good base case”.
Chair Jay Powell recently suggested such a reduction would be delivered through two quarter-point cuts rather than another half-point move.
