People shop for groceries at a store in New York City, U.S., July 15, 2025. REUTERS/Jeenah Moon

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer prices increased slightly less than expected in September as a surge in the cost of gasoline was partially offset by a sharp moderation in rents, keeping the Federal Reserve on track to cut interest rates again next week.

Consumer inflation last month also was restrained by a slowdown in the pace of price increases for airfares, hotel and motel rooms as well as cheaper used cars and trucks, the report from the Labor Department showed on Friday. But tariffs on imports continued to raise prices for apparel, appliances, furniture and bedding, and sporting goods.

The report was published despite an economic data blackout caused by the U.S. government shutdown in order to help the Social Security Administration calculate its 2026 cost-of-living adjustment for millions of retirees and other benefits recipients. It was initially due on October 15. The White House later warned that October's inflation report might not be published for the first time ever because the shutdown has halted data collection.

"This inflation print is a sigh of relief for the Fed," said Olu Sonola, head of U.S. economic research at Fitch Ratings. "The tariff passthrough generally remains muted, as the focus shifts squarely to a weakening labor market. This will be framed as an insurance cut, with hopes that by December the shutdown is over and the Fed has a clearer read on jobs."

The Consumer Price Index rose 0.3% last month after climbing 0.4% in August, the Labor Department's Bureau of Labor Statistics said. A 4.1% jump in the price of gasoline was the main driver of the rise in the CPI.

Food prices rose 0.2% after accelerating 0.5% in August. Grocery store food prices increased 0.3% amid a 0.7% surge in the cost of cereals and nonalcoholic beverages.

Beef prices rose 1.2% after shooting up 2.7% in August. They increased 14.7% compared to the same period in 2024, driven in part by droughts in prior years that raised the cost of feed. Coffee prices dipped 0.1% after surging 3.6% in August. Prices were 18.9% higher compared to September 2024, reflecting the impact of drought and tariffs.

In the 12 months through September, the CPI increased 3.0% after advancing 2.9% in August. Economists polled by Reuters had forecast the CPI would increase by 0.4% on a monthly basis and 3.1% on a year-over-year basis.

Excluding the volatile food and energy components, the CPI gained 0.2% after rising 0.3% in August. Slowing rent inflation accounted for the moderation in the so-called core CPI. Owners' equivalent rent edged up 0.1%, the smallest gain since January 2021. Prices for hotel and motel rooms increased 1.3% after rising 2.3% in the prior month. The cost of airline tickets increased 2.7% after soaring 5.9% in August.

While the import tariff passthrough has been gradual as businesses worked through inventory accumulated prior to President Donald Trump's imposition of broad duties and absorbed some of the taxes, prices for apparel rose 0.7%. Appliance prices increased 0.8%, while furniture and bedding cost 0.9% more.

INVENTORIES HAVE BEEN DRAWN DOWN

Economists estimated consumers so far have absorbed about 20% of the import duties. They said businesses have refrained from passing on the full costs of tariffs to consumers at the expense of hiring.

But inventories were drawn down in the second quarter and retailers like Walmart said they were seeing costs rise as they replenished stock at post-tariff price levels, something they expected to continue for the rest of the year. Economists expect prices to steadily rise into 2026.

The U.S. central bank tracks the Personal Consumption Expenditures price indexes for its 2% inflation target. The Fed is expected to lower its benchmark overnight interest rate by another 25 basis points to the 3.75%-4.00% range next Wednesday.

U.S. stocks opened higher. The dollar slipped against a basket of currencies. Longer-dated U.S. Treasury yields rose.

While investors and policymakers will welcome the reprieve from the official economic data blackout, concerns are rising over the quality of future data, given the suspension of collection efforts.

Consumer price data is collected throughout the month, the bulk of it physically, and the shutdown means more than half of the October data is already missing. The White House said it had learned that October's CPI report would likely not be published next month.

"Because surveyors cannot deploy to the field, the White House has learned there will likely NOT be an inflation release next month for the first time in history — depriving policymakers and markets of critical data and risking economic calamity," the White House said in a statement.

During the 2013 government shutdown, about 75% of the CPI data for the month of October was collected.

The BLS is already dealing with resource constraints because of budget and staffing cuts that have led to the suspension of data collection for portions of the CPI basket in some areas across the country.

(Reporting by Lucia Mutikani, additional reporting by Doina Chiacu; Editing by Andrea Ricci, Chizu Nomiyama and Paul Simao)