Inflation in the United States remains high, but prices rose less than expected last month

WASHINGTON (AP) — U.S. inflation remained high last month as gas prices jumped while the cost of rents and some services fell, painting a mixed picture of the expenses consumers face in an uncertain economy where growth appears flat but hiring is slow.

The Labor Department said Friday that consumer prices rose 3% in September from a year earlier, the highest level since January and up from 2.9% in August. Excluding the volatile food and energy categories, core prices also rose 3%, down from 3.1% the previous month.

Read more: The shutdown delays the release of the Labor Department’s monthly inflation report

On a monthly basis, prices rose by 0.3% in September, compared to 0.4% in the previous month. Core inflation also fell to 0.2% from 0.3% in August.

The CPI report was released more than a week late due to the government shutdown, and is now in its fourth week. The Trump administration subpoenaed some Labor Department staff to produce the numbers because they are used to determine the annual cost-of-living adjustment for about 70 million Social Security beneficiaries.

These numbers reflect a smaller increase than many economists expected, and will come as something of a relief to Fed officials, who have indicated they will cut their key interest rate at their meeting next week, and may do so again in December. However, inflation remains above the Fed’s 2% target, highlighting the high risks of the Fed’s moves.

Gas prices jumped by just 4.1% in September compared to the previous month, which was the main driver of inflation last month. Grocery prices rose 0.3%, lower than in August, and 2.7% higher than a year ago.

Issues of affordability and the cost of necessities are gaining political importance. Concerns about rent and grocery costs played a major role in the mayoral race in New York City. Trump, who has acknowledged that rising grocery prices under President Joe Biden helped him win the 2024 election, was considering importing Argentine beef to bring down record high US beef prices, angering US cattle ranchers.

The cost of ground beef jumped to $6.32 per pound, a record high, partly due to tariffs on imports from countries like Brazil, which faces 50% duties. Years of drought that reduced livestock herds also pushed up prices.

Even as inflation has fallen sharply from its peak of 9.1% more than three years ago, it remains a major concern for consumers. About half of Americans say the cost of groceries is a “major” source of stress, according to an August poll by The Associated Press-NORC Center for Public Affairs Research.

The Conference Board, a business research group, finds that consumers still cite prices and inflation in responses to its monthly consumer confidence survey.

However, inflation did not rise as much as many economists feared when Trump first announced a wide range of tariffs. Many importers built stockpiles of goods before the tariffs took effect, while Trump cut many import taxes, including as part of trade deals with China, the United Kingdom and Vietnam.

Many economists, as well as some Fed officials, expect the tariffs to lead to a one-time price increase that will fade by early next year. Meanwhile, inflation excluding tariffs is falling, they say: increases in rental rates, for example, are falling on average nationally.

However, Trump is imposing tariffs in an ongoing manner that could raise prices in a more sustainable way.

For example, the Trump administration is investigating whether to impose 100% tariffs on imports from Nicaragua over alleged human rights violations. The prospect of such exorbitant fees is a major headache for Dan Rattigan, co-founder of luxury chocolate maker French Broad, based in Asheville, North Carolina.
“We incurred some significant additional costs,” Rattigan said. The United States barely produces any cocoa, so his company imports it from Nicaragua, the Dominican Republic and Uganda. Imports from Nicaragua were duty-free because the country had a trade agreement with the United States, but now face an 18% import tax.

Cocoa prices have doubled over the past two years due to bad weather and pests in West Africa, which produces more than 70% of the world’s cocoa. The tariffs are an added blow on top of that. Rattigan is also paying more for almonds, hazelnuts and chocolate-making equipment from Italy, which has also been hit by tariffs.

French Broad raised its prices slightly earlier this year and has no plans to do so again. But after the winter break, “all bets are off…in a very unpredictable business climate,” Rattigan said.