New U.S. Inflation Data Shows Ongoing Pressure on Household Budgets
Inflation in the United States edged higher in September, according to new figures released shortly before the Federal Reserve’s next interest rate decision. The latest government data indicates that many consumers continue to feel the strain of elevated prices across essential goods and services.
The personal consumption expenditures price index, which the Federal Reserve considers its main inflation measure, rose to 2.8 percent year-on-year in September. That is slightly above the 2.7 percent reading recorded in August, the Bureau of Economic Analysis reported. The core PCE index, which excludes the more volatile categories of food and energy, held steady at 2.8 percent, showing a marginal improvement over the previous month’s 2.9 percent result. The release of the data was delayed due to the recent government shutdown.
Household budgets remain under heavy pressure, with notable price increases recorded in durable goods such as vehicles and furniture. Those categories rose 1.4 percent compared to a year earlier, signaling continuing affordability challenges for families making large purchases.
Consumer sentiment showed a mild rebound in December, according to a separate survey from the University of Michigan, which recorded a rise in its index to 53.3 from 51.0 in November. Even so, the broader outlook remains weak. Survey Director Joanne Hsu said that expectations for personal income growth have fallen and views of the labor market remain subdued. Many respondents continue to point to the burden of high prices as the dominant factor shaping their outlook.
The Federal Reserve has reduced interest rates at its last two meetings after signs of cooling employment figures, but policymakers are cautious about loosening policy too quickly. Analysts say the central bank must balance emerging risks from inflation with concerns about economic slowing. Gregory Daco, chief economist at EY-Parthenon, expects the Fed to deliver another rate cut next week and predicted that Chair Jerome Powell will likely persuade the more cautious members of the policy committee. However, he added that further rate reductions may pause unless the economy shows more significant signs of weakness.
Daco also highlighted what he called a “gradual and uneven” transmission of tariff costs into consumer prices, which is worsening affordability issues. As inventories purchased before tariff increases are depleted, he warned that the cost of everyday goods could rise more sharply. That pressure could push inflation higher in late 2025 and early 2026, adding to economic uncertainty as labor market conditions soften.
