A man shops for produce at a supermarket in Monterey Park, Calif.
FREDERIC J. BROWN/AFP via Getty Images/AFP
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FREDERIC J. BROWN/AFP via Getty Images/AFP
Annual inflation rose less than expected in September, according to a crucial report published Friday, nine days later than normal due to the government shutdown.
Consumer prices rose 3.0% in September from a year ago, slightly below forecasters’ expectations, according to the U.S. Bureau of Labor Statistics (BLS). On a month-to-month basis, prices rose 0.3%, cooling slightly from the 0.4% inflation reported in August.
Overall, the inflation data will likely add fuel to expectations that the Federal Reserve to cut interest rates by another quarter percentage point at its policy meeting next week — its second consecutive cut.
Wells Fargo economist Nicole Cervi is among those expecting a cut — despite the latest evidence that prices are still rising faster than the Fed’s 2% target.
“Even if the monthly inflation data came in softer than expected,” the underlying trend is that “inflation remains persistent,” she says.
The Fed is missing a lot of other key economic data since most BLS workers were furloughed at the beginning of the month, when the shutdown began. Most government economic reports have been suspended until funding is restored.
But a core group of BLS number-crunchers were recalled specifically to publish the September inflation report, which was initially set to publish on Oct. 15. That’s because it’s a key part of the formula used to calculate the cost-of-living adjustment (COLA) that 75 million Social Security recipients will receive next year.
The Social Security Administration (SSA) later on Friday said that payments to recipients will increase by 2.8% next year, or an increase of about $56 per month starting in January.
The COLA increase for next year is higher than the 2.5% increase that Social Security beneficiaries got this year, but it’s below the 3.1% average over the past decade, according to the SSA.
“That’s better than nothing … but there’s so many more things that need to get fixed,” says Jim Pedersen, a 66-year-old retired autoworker who’s also the president of the Michigan Alliance for Retired Americans, a nonprofit founded by the AFL-CIO.
He points out that seniors tend to spend more money on health insurance and prescriptions than younger Americans — and that the prices for health care are outpacing inflation. Medicare premiums are projected to rise by more than 11% next year, according to AARP.
“So they’re going to outstrip that 2.8% really fast,” he says.
The raw material for the inflation report – the price checks on hundreds of goods and services around the country – was collected in September. Tariffs continue to put upward pressure on the price of imported goods, while other components of inflation, such as housing costs, have been moderating somewhat.