US inflation has returned to 3%. It’s higher than normal but not out of control

The cost of living became even more expensive for Americans last month, with prices rising at the fastest pace since the start of the year.

Consumer prices rose 0.3% in September, pushing the annual inflation rate from 2.9% to 3%, the highest rate since January, according to Bureau of Labor Statistics data released Friday.

Gasoline prices, which rose 4.1% overall and 4.2% for regular unleaded gasoline (the two largest monthly increases since August 2023), were the main contributors to the monthly increase, according to BLS data.

Food prices rose at a more moderate pace than in August (a month in which food prices jumped at the highest pace in almost three years). And housing inflation also continued its long slowdown.

Economists expected inflation to continue accelerating, rising 0.4% for the month and 3.1% from a year earlier, according to FactSet estimates.

Excluding food and energy, which can be quite volatile, the core CPI measure rose 0.2% in September, with the annual inflation rate sitting at 3%.

Although better than economists expected, Friday’s inflation data is a disconcerting reminder that prices continue to rise faster than they usually should.

“There is a psychological step to take to get back to that 3% level,” Heather Long, chief economist at Navy Federal Credit Union, said in a CNN interview.

Due to inflation, the typical U.S. household is spending $208 more per month in September on the same goods and services than a year ago, and $1,043 more per month than at the start of 2021, coming out of the pandemic, according to new data from Moody’s Analytics.

The weaker inflation numbers for September give the green light for a rate cut from the Federal Reserve, which is holding a policy meeting next week, wrote Christopher Rupkey, chief economist at FwdBonds.

However, Rupkey cautioned that the better-than-expected report may also paint a rosier picture than actually exists.

“The immediate dangers of Trump 2.0 tariff policies have not yet been reflected in headline inflation,” he wrote in a note to investors Friday. “The market will likely hold back its applause, as one reason inflation is contained could be due to the economic slowdown seen in many labor market indicators.”

Friday’s report provided further evidence that high tariffs imposed by President Donald Trump are driving up prices on some products. Categories such as clothing, furnishings, shoes and appliances all continued to see their prices rise last month, and a closely watched inflation index (basic goods excluding automobiles) is up 1.3% annually, which is the highest since August 2023.

However, the September report is somewhat unique in itself: This is the first major federal economic report released since the U.S. government shutdown on October 1.

The September CPI, originally scheduled for release on October 15, is being released late so the government can meet deadlines for making cost-of-living adjustments for social security payments in 2026.