24 October 2025
If you are covering the latest US inflation data, please see the following comment from Lindsay James, investment strategist at Quilter:
“After a week’s delay and concerns over its accuracy, official data suggests US inflation increased to 3.0% year on year, up from the 2.9% recorded last year but slightly less than had been anticipated. Core CPI reportedly fell marginally to 3%, down from 3.1% previously. However, the ongoing US government shutdown has added complexity. Today’s print suggests the data collection was completed prior to the shutdown. While today’s figures might be more reliable than first expected, it perhaps serves as a warning on the accuracy in the coming months should the shutdown continue. The overall dearth of official data will heap the pressure onto the Federal Reserve at a time when the administration is already interfering considerably.
“That said, if we look at the data produced today, we can see the rise in gasoline was the largest contributor to the all items monthly increase, rising 4.1%, and the index for energy rose 1.5%. Meanwhile, the food index increased 0.2% as the food and home index rose 0.3%. The inflationary effect from tariffs has seemingly been more lagged than many expected. This is likely due to a combination of stockpiling and lengthy shipping lead times, with goods that have left the port of origin before tariff implementation typically exempt from duties. Meanwhile new tariffs keep on coming, with October bringing new rates on timber and furniture. If Trump continues to come and go with his tariff announcements, with Canada the latest to face his ire, the inflationary effects could be elongated.
“The Fed seems content to look through any inflationary effects from tariffs as they believe they are a ‘one off’ and are instead focussing more on the labour market, and specifically weaker payroll figures, using these as ‘cover’ to cut interest rates. Payroll employment gains have shrunk from around 160k per month in 2024 to 22k in August, and at the same time the foreign-born labour force has shrunk by an estimated 1.1m in 2025. With the latter likely explaining much of the former, it’s unclear why the labour market, with unemployment at just 4.3%, is such a concern. Despite inflation heading further from its 2% target, the Fed is clearly focussed on rate cuts with the market expecting five quarter point cuts by the of 2026. Despite uncertainty over future inflation data, for now, it doesn’t seem to be steering them off on a different course.”
