Inflation didn't get any worse before government shutdown. Fed seen cutting rates again.

MW Inflation didn't get any worse before government shutdown. Fed seen cutting rates again.

By Jeffry Bartash

PCE index shows stable inflation of just under 3%

People wait in line at a bakery in California. Inflation is still a source of irritation for Americans.

The numbers: The rate of U.S. inflation stayed stuck close to 3% before the government shutdown, adding a final piece of the puzzle before the Federal Reserve votes on whether to cut interest rates again.

The PCE index for September probably won't play a key role during the Fed debate next week since the report is two months late. Yet it does show inflation was stable, if elevated, in the early fall.

The PCE index rose 0.3% in September, with a smaller 0.2% increase in the core rate. The core rate omits food and energy and is a better predictor of future inflation.

The yearly increase in inflation edged up to 2.9% in September from 2.8% in the prior month, leaving the rate well above the Fed's 2% goal.

The 12-month increase in the core rate slipped to 2.8% from 2.9% in a good sign.

Some Fed officials are worried about inflation and don't want to cut interest rates at their Dec. 9-10 meeting.

Yet others see a emerging hiring freeze as the biggest threat to the economy. They want to lower borrowing costs to help stabilize the labor market.

Investors widely believe the Fed will cut rates again.

Big picture: The Fed is not done cutting interest rates, but as long as inflation is stuck above its 2% goal, top officials are sure to proceed cautiously.

While lower rates will help the economy, ongoing uncertainty tied to higher U.S. tariffs could continue to hold the economy back.

Market reaction: The Dow Jones Industrial Average and S&P 500 rose in Friday trading and closed in on record highs.

The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) was little changed at 4.12%.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 05, 2025 10:09 ET (15:09 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.