US Inflation Slows to 2.4% in September, Strengthening Rate-Cut Bets

US inflation cooled more than expected in September, with the Consumer Price Index rising 2.4% from a year earlier, according to the latest government data. That marks the lowest annual inflation rate since February 2021 and came in below economists’ forecast of 2.6%. On a monthly basis, prices continued to moderate, suggesting that the post-pandemic surge in inflation is easing further.

Core CPI, which strips out the more volatile food and energy categories, increased 3.3% year over year. While still above the Federal Reserve’s long-term target, the reading reinforces the view that underlying price pressures are gradually softening. The report is likely to be welcomed by policymakers looking for evidence that inflation is moving sustainably lower without a sharp deterioration in the labor market.

Markets quickly interpreted the data as increasing the odds of a Federal Reserve rate cut at the central bank’s November meeting. Investors have been closely watching inflation trends for clues about the pace of monetary easing, and the latest figures add to the case that the Fed may have more room to support growth as price gains cool. The report also offers some relief to households and businesses after years of elevated borrowing costs and persistent cost-of-living pressures.