“Altogether, despite the upside surprise in core CPI, we don’t think the report will alter the FOMC’s view that inflation is on a downtrend trajectory. We expect the FOMC to cut rates by 25 basis points at the Nov. 6-7 meeting.”
— Anna Wong and Stuart Paul. To read the full note, click here
Excluding housing and energy, service prices rose 0.4%, the most since April, according to Bloomberg calculations. It also represented the third straight acceleration, the longest streak since early 2023. While central bankers have stressed the importance of looking at such a metric when assessing the nation’s inflation trajectory, they compute it based on a separate index.
That measure — known as the personal consumption expenditures price index — doesn’t put as much weight on shelter as the CPI does, partly why it’s trending closer to the Fed’s 2% target.
The PCE measure, which will be released later this month, draws from the CPI as well as certain categories within the producer price index, which is due Friday. Several of the CPI items that registered robust gains, like car insurance and airfares, won’t feed through to the PCE, which should support another tame advance when the data are released later this month.
Policymakers also pay close attention to wage growth, as it can help inform expectations for consumer spending — the main engine of the economy. A separate report Thursday that combines the inflation figures with recent wage data showed that real earnings grew 1.5% from a year ago, the most since June 2023.
Other government data showed Social Security benefits will increase 2.5% in 2025 — the smallest boost since 2021 — per an annual cost-of-living-adjustment that’s calculated based on CPI data.
