PCE inflation report September 2025:

A key inflation gauge was lower than expected in September, the Commerce Department said in a report Friday, in a report that was delayed by the government shutdown and gave the Federal Reserve another green light to cut interest rates.

The core personal consumption expenditures price index, which excludes fluctuating food and energy prices, increased by 0.2% monthly, while the annual increase rate was 2.8%. The monthly rate was in line with the Dow Jones consensus, but the annual level was 0.1 point lower. The core annual rate fell from 2.9% in August.

In addition, the headline PCE rose 0.3% for the month, pushing the annual inflation rate to 2.8%, according to the department’s Bureau of Economic Analysis. Both of these readings were in line with expectations, although the annual rate rose 0.1 percentage point from August.

Federal Reserve officials use the PCE price index as their primary policy tool for addressing inflation. While officials look at both measures, they generally think the core is a better indicator of long-term inflation trends.

Goods prices rose 0.5% in the month as President Donald Trump’s tariffs continued to impact the economy. Service prices increased by only 0.2%. While food increased by 0.4%, energy increased by 1.7%.

The report also showed that the personal savings rate remained at 4.7%, unchanged from August.

The report was delayed by several weeks due to the government shutdown, which halted all data collection and economic reporting.

In addition to inflation figures, the report also included information on income and expenditures.

Personal income increased by 0.4% in the month, while expenses increased by 0.3%. Revenue was 0.1 point above the estimate, and expenditure was 0.1 point below the estimate.

Stocks extended gains after the announcement as investors expected the Fed to cut interest rates by a quarter point when it announces its decision on Wednesday.

Although the September reading is retroactive, it will be the last price reading the Fed will take before its monetary policy meeting next week. Futures market pricing implies the rate-setting Federal Open Market Committee is almost certain to approve another quarter-point cut at its meeting that ends Wednesday.

But policymakers are unusually divided over what the next steps on interest rates should be.

One FOMC group supports additional cuts as a way to prevent further weakness in the labor market, while another sees the continued threat of inflation requiring interest rates to be kept in a more restrictive position.

While recent indicators on the labor market show slow progress in hiring, some specific data points suggest that layoffs are increasing. But Labor Department data actually showed a decline in applications for unemployment benefits last week.

A separate economic report released Friday showed consumer sentiment was slightly better than expected from early December.

University of Michigan consumer survey It came in at 53.3, up 4.5% from November and better than Wall Street’s estimate of 52. Inflation expectations also fell; the one-year outlook fell to 4.1% and the five-year outlook fell to 3.2%; both were at their lowest levels since January.