US inflation stays elevated but prices rose less than feared last month
[October 25, 2025] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — U.S. inflation remained elevated last month as gas
prices jumped while the cost of rents cooled, painting a mixed picture
of the expenses consumers are facing in a murky economy where growth
appears steady but hiring slow.
Consumer prices increased 3% in September from a year earlier, the Labor
Department said Friday, the highest 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% in the previous month.
On a monthly basis, price increases slowed: Consumer prices rose 0.3% in
September, down from 0.4% the previous month. Core inflation also cooled
to 0.2%, from 0.3% in August.
The figures show that inflation continues to rise more slowly than many
economists expected when President Donald Trump imposed sweeping tariffs
in April. Some of those duties were later reduced as part of trade
deals, while many companies have only passed on part of the tariff cost
to consumers out of concern that doing so would reduce sales. Businesses
may shift more costs to consumers in the coming months if the duties
appear permanent.
The smaller increase will come as a bit of relief to Federal Reserve
officials, who have signaled that they will cut their key interest rate
at their meeting next week for the second time this year. Yet inflation
remains above the Fed’s 2% target, underscoring the high stakes of the
Fed’s moves.
“Put simply, while inflation doesn’t appear to be accelerating, neither
is it moving back toward target,” said Eric Winograd, chief U.S.
economist at asset manager AllianceBernstein. “That will keep the Fed
cautious rather than aggressive.”
The data for Friday's report was gathered before the government shutdown
Oct. 1 and was collected and compiled in the same way it is each month.
But price data for October isn't being gathered because of the shutdown,
and the Trump administration suggested Friday that the government won't
issue an inflation report next month. While some data is collected
electronically, much of it is taken in person.
“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,” the administration said in an emailed statement.
The report on the consumer price index was issued more than a week late
because of the government shutdown, now in its fourth week. The Trump
administration recalled some Labor Department employees to produce the
figures because they are used to set the annual cost-of-living
adjustment for roughly 70 million Social Security recipients. On Friday
that increase was set at 2.8% for 2026, equal to about $56 per month.
Gas prices jumped 4.1% just in September from the previous month, a
major driver of inflation last month. Grocery prices rose 0.3%, less
than in August, and are 2.7% higher than a year ago.
Trump's duties are pushing up the prices of many goods: Furniture costs
jumped 0.9% last month and are 3.8% more expensive than a year ago.
Appliance costs rose 0.8% just in September, though they are up only
1.3% from a year earlier. Clothing prices increased 0.7% last month and
shoes 0.9%, though neither have risen that much from last year.
Economists estimate that tariffs are adding about 0.4 percentage points
to annual inflation, a trend that they expect will likely continue until
early next year. A key question, however, is whether that tariff bump
will simply lead to a one-time price increase or cause a more sustained
burst of inflation.
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A worker stocks a display of clothing at a Sam's Club, Wednesday,
Sept. 24, 2025, in Bentonville, Ark. (AP Photo/Charlie Riedel)
 For now, there are signs that
underlying inflation trends are cooling. For example, the cost of
renting an apartment rose just 0.2% in September and 3.4% compared
to a year ago. The annual increase was the smallest in nearly four
years. Rental cost increases spiked sharply during the pandemic, but
have now returned to pre-pandemic levels.
Still, business surveys suggest that many companies are still eating
much of the cost of the tariffs, but may not be able to do so
indefinitely.
“People are getting to the point where they can’t hold it anymore,
and they’re going to have to increase prices,” Diane Swonk, chief
economist at KPMG, said.
Some analysts note that Trump is imposing tariffs in an ongoing
fashion that could raise prices in a more sustained way.
For example, the Trump administration is investigating whether to
slap 100% tariffs on imports from Nicaragua over alleged human
rights violations. The prospect of such steep duties is a major
headache for Dan Rattigan, the co-founder of premium chocolate maker
French Broad, based in Asheville, N.C.
“We’ve been shouldering 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. The
imports from Nicaragua were duty-free because the country had a
trade agreement with the United States, but now faces an 18% import
tax.
Cocoa prices have more than doubled over the past two years because
of poor weather and blights in West Africa, which produces more than
70% of the world’s cocoa. The tariffs are an additional hit on top
of that. Rattigan is also paying more for almonds, hazelnuts, and
chocolate-making equipment from Italy, which has also been hit with
tariffs.
French Broad raised its prices slightly earlier this year and
doesn’t have any plans to do so again. But after the winter
holidays, “all bets are off ... in what is a very unpredictable
business climate,” Rattigan said.
The issues of affordability and the cost of necessities are gaining
in political importance. Concerns over the costs of rent and
groceries have played a key role in the mayoral race in New York
City. And Trump, who has acknowledged that the spike in grocery
prices under President Joe Biden helped him win the 2024 election,
has been considering importing Argentine beef to reduce record-high
U.S. beef prices, angering U.S. cattle ranchers.
The cost of ground beef has jumped to $6.32 a pound, a record, in
part because of tariffs on imports from countries such as Brazil,
which faces a 50% duty. Years of drought that have reduced cattle
herds have also raised prices. Beef costs rose 1.2% in September and
are up 14.7% from a year earlier, Friday's report showed.
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 all 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.
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