By Nick Timiraos
Friday's consumer-price index report likely leaves the Federal Reserve on course to cut interest rates next week and to maintain a soft bias favoring another cut at the meeting after that. Fed leaders at the end of the summer pivoted towards cutting rates after judging that recent labor-market softness outweighed modest setbacks on inflation, and the September CPI hardly alters that calculus.
Before the latest readings, it seemed possible that officials would face greater divisions over whether to follow next week's cut with another one in December. But the September price readings could ease worries among some officials who have been more anxious about inflation and weaken internal resistance to another rate cut in December. They could also embolden Fed officials who have supported cuts by revealing how businesses or consumers aren't willing or able to tolerate meaningful price increases.
The latest figures show that inflation, while still elevated, isn't proving to be as big of a worry as Fed officials initially feared when President Trump announced large increases in tariffs this spring.
In part, that is because official measures of housing cost growth have slowed markedly over the past two years, offsetting any bump in prices from imported goods.
In addition, inflation readings through the summer and public comments from corporate executives indicate companies are taking a range of strategies to avoid hitting consumers with large, upfront cost increases due to tariffs. That means tariff-related price increases could trickle through the supply chain and reach store shelves over the course of a year, rather than arriving in a concentrated wave over a few months.
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(END) Dow Jones Newswires
October 24, 2025 10:26 ET (14:26 GMT)
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