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US inflation rises to 3% in September — paving way for fed to cut rates next week

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US Inflation Ticks Up to 3% in September, Paving the Way for Federal Reserve Rate Cuts

US inflation edged up in September to 3%, a slightly lower-than-expected figure that clears the path for the Federal Reserve to cut interest rates at its policy meeting next week.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) increased by 3% over the past 12 months ending September. This marks the fastest inflation rate since the start of the year and a small rise from August’s 2.9%. Despite this increase, economists polled by Bloomberg had anticipated a slightly higher year-over-year inflation rate of 3.1%.

On a monthly basis, the CPI rose by 0.3%. Core inflation, which excludes the more volatile food and energy prices, also grew by 3% over the last 12 months. This was a slight decline from the previous month’s 3.1%, while economists expected it to remain steady at 3.1%.

The release of September’s CPI report was delayed by more than a week due to the ongoing federal government shutdown, now the second-longest in US history at 23 days with no clear end in sight. The report, originally scheduled for October 15, finally provided insight into inflation trends amid significant economic uncertainty.

“Inflation coming in weaker-than-expected further solidifies a continuation of the Federal Reserve’s rate cutting cycle, at least for the next two meetings,” said Skyler Weinand, Chief Investment Officer at Regan Capital. He added, “Once the government reopens and if we start to see weak unemployment data and the unemployment rate rises precipitously towards 5%, we could expect either a 50 basis point cut for December or the Fed to communicate a string of cuts in 2026.”

Wall Street welcomed the data with cautious optimism. The Dow Jones Industrial Average rose by 66 points, or 0.1%, in premarket trading. However, concerns remain about the accuracy of the consumer inflation report, given the disruption caused by the government shutdown.

The Federal Reserve is widely expected to cut interest rates at its policy meeting next Wednesday, following its first quarter-point reduction since December, which was implemented last month. However, there remains some disagreement among Fed officials on the pace of easing. For instance, Fed Governor Stephen Muir, recently appointed by President Trump, has advocated for a half-point cut, while others, including Christopher Waller, favor a more gradual quarter-point reduction.

Economists are also monitoring any indications that President Trump’s tariffs are beginning to impact consumer prices. As inflation and economic signals evolve, all eyes will remain on the Fed’s upcoming decision and the broader effects of ongoing fiscal policies.
https://nypost.com/2025/10/24/business/us-inflation-rises-to-3-in-september-paving-way-for-fed-to-cut-rates-next-week/

Dollar Gains as the Euro and Yen Retreat

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The dollar index (DXY00) extended this week’s rally on Wednesday, rising +0.32% to reach a 1.75-month high. Political uncertainty in France and Japan has put downward pressure on the euro and yen, respectively, benefiting the dollar.

Wednesday afternoon saw additional gains for the dollar following the release of the hawkish minutes from the September 16-17 FOMC meeting. However, strength in the stock market reduced liquidity demand, limiting the extent of the dollar’s gains. Meanwhile, the ongoing U.S. government shutdown, which entered its second week on Monday, remains a bearish factor for the dollar. The longer the shutdown lasts, the greater the risk of adverse effects on the U.S. economy, negatively impacting the dollar.

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### FOMC Meeting Minutes and Interest Rate Outlook

The minutes from the September 16-17 Federal Open Market Committee (FOMC) meeting displayed a slightly hawkish tone. While most policymakers indicated it would be appropriate to ease policy further over the remainder of the year, a majority emphasized upside risks to their inflation outlooks. Markets are currently pricing in a 93% probability of a -25 basis points rate cut at the upcoming FOMC meeting on October 28-29.

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### Eurozone Update: EUR/USD Falls to 6-Week Low

The EUR/USD (^EURUSD) pair extended its losses on Wednesday, declining by -0.29% to a six-week low. Weaker-than-expected economic data from the Eurozone weighed heavily on the euro. Specifically, German industrial production for August posted its largest monthly decline in nearly three and a half years, dropping -4.3% month-over-month versus expectations of -1.0%.

Adding to the euro’s woes, political turmoil in France intensified after Prime Minister Lecornu resigned following President Macron’s appointment of a new cabinet. This development raised uncertainty around the Eurozone’s second-largest economy.

ECB Governing Council Member Muller commented that the Eurozone economy is slowly picking up and inflation is aligned with the ECB’s 2% target. Still, swaps markets currently assign only a 1% chance of a -25 basis points rate cut by the ECB at the October 30 policy meeting.

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### USD/JPY Moves Higher Amid Yen Weakness

The USD/JPY (^USDJPY) rose +0.55% on Wednesday as the yen extended its weekly selloff to a 7.75-month low against the dollar. The yen came under pressure due to weak wage growth in Japan — a dovish factor for Bank of Japan (BOJ) policy — with August labor cash earnings rising less than expected (+1.5% year-over-year versus +2.7% anticipated).

Higher U.S. Treasury note yields also contributed to yen weakness. However, losses were somewhat contained after the September Eco Watchers Outlook Survey in Japan improved more than expected, reaching a nine-month high.

Concerns have mounted over the election of Sanae Takaichi as leader of Japan’s ruling Liberal Democratic Party, making her the likely next Prime Minister. Her victory has tempered expectations of imminent BOJ policy tightening and raised worries about increased debt issuance given her support for expanded fiscal stimulus.

**Key Data Points:**

– Japan September Eco Watchers Outlook Survey: +1.0 to 48.5 (9-month high), above expectations of 47.8
– Japan August Labor Cash Earnings: +1.5% y/y, below expected +2.7%

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### Precious Metals Rally on Safe-Haven Demand

December gold (GCZ25) closed up +66.10 points (+1.65%) on Wednesday, while December silver (SIZ25) rose +1.479 points (+3.11%). Precious metals surged sharply, with December gold hitting a new contract high and nearest-futures gold (V25) reaching an all-time high of $4,049.20 per troy ounce. December silver also posted a contract high, and the nearest-futures silver logged a 14-year peak.

The ongoing U.S. government shutdown is driving safe-haven demand for precious metals. Political turmoil in France, following Prime Minister Lecornu’s resignation, is further boosting this demand. Additionally, metals are benefiting from safe-haven status amid uncertainty tied to U.S. tariffs, geopolitical risks, and global trade tensions.

The election of Sanae Takaichi in Japan, a proponent of easy fiscal and monetary policy, supports demand as a store of value. Central bank buying is also underpinning gold prices. Notably, the People’s Bank of China (PBOC) added 40,000 troy ounces of gold to its reserves in September, marking the 11th consecutive month of reserve increases.

Despite the dollar index rallying to a 1.75-month high on Wednesday — typically a negative factor for precious metals — safe-haven support remains strong. President Trump’s attacks on Fed independence have further bolstered gold demand. Weaker-than-expected U.S. economic data has strengthened the outlook for additional Fed rate cuts, which is bullish for precious metals. The swaps market currently indicates a 93% probability of a 25 basis point Fed rate cut at the October 28-29 FOMC meeting.

Meanwhile, fund buying of precious metal ETFs continues to support prices. Gold holdings in ETFs rose to a three-year high on Tuesday, with silver holdings reaching a three-year peak last Wednesday.

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*On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article.*

*All information and data in this article is for informational purposes only. For more details, please view the Barchart Disclosure Policy.*

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**More from Barchart:**
– What Should We Expect from the Commodity Complex This Week?
– 3 Reasons for Gold’s Record Rally
– As the Bank of England Warns on Inflation, Make This 1 Trade Now
– FAQ Friday

*The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.*
https://www.nasdaq.com/articles/dollar-gains-euro-and-yen-retreat