The U.S. annual inflation rate rose to the highest level since January, driven by higher gasoline prices and shelter costs.

According to new Bureau of Labor Statistics data, released on Oct. 24, the 12-month inflation rate climbed to 3 percent in September, from 2.9 percent in August.

Core inflation, which excludes energy and food prices because of their volatility, slowed to a smaller-than-expected 3 percent year over year, from 3.1 percent the previous month.

On a monthly basis, the consumer price index (CPI) and core CPI rose by 0.3 percent and 0.2 percent, respectively—both readings came in below market estimates.

The energy index jumped 1.5 percent from August to September, with gasoline rising by 4.1 percent. Electricity and utility piped gas services fell 0.5 percent and 1.2 percent, respectively.

Despite the recent geopolitical-fueled surge in crude oil prices, they have fallen considerably this year, with the U.S. benchmark sliding 13 percent.

The median estimate, according to FactSet Insights, suggested the year-over-year increase in the CPI would be 3.1 percent.

This has eased the pain at the pump in recent weeks.

The national average for a gallon of gasoline is slightly above $3. Several states, including Florida, Colorado, West Virginia, and Wyoming, have seen average prices drop below $3, according to the American Automobile Association.

As a result, relief in the energy index for October could occur.

Food inflation edged up 0.2 percent from August to September, with supermarket prices climbing 0.3 percent and food away from home ticking up 0.1 percent.

Within the index, there were notable increases and declines.

Beef and veal, which have risen substantially this year, increased by 1.2 percent in September after an increase of 2.7 percent in August. Uncooked beef roasts spiked 4.8 percent, and uncooked ground beef rose 0.5 percent.

President Donald Trump recently stated that the United States could import Argentine beef to alleviate some of the price pressures consumers have faced at the grocery store.

Egg prices—another food item that had rocketed earlier in the year—declined 4.7 percent last month and are down 1.3 percent year-over-year.

Despite coffee hitting an all-time high in the futures market, prices unexpectedly dipped 0.1 percent in September. Roasted coffee made from Arabica beans dropped 0.4 percent. Instant coffee, which is typically made from the Robusta bean, jumped 0.5 percent.

The index for shelter rose 0.2 percent and is up 3.6 percent on a 12-month basis.

Shelter costs have not cratered, with industry data indicating they have stabilized.

U.S. home prices rose 0.2 percent monthly in September, Redfin data show. On a year-over-year basis, home prices advanced 3 percent, the slowest rate recorded in the group’s dataset since 2012. The average rent price in the United States was $1,785, and the numbers have remained little changed over the last 12 months.

Federal Reserve Governor Stephen Miran believes that as housing inflation dissipates, aggregate inflation levels will start declining and return to the central bank’s 2 percent target level.

“We are due for a significant amount of disinflation from the housing market,” Miran said at a Nomura Research Forum event. “So much of my view is predicated on the shelter channel that if that started coming in higher ... I would have to look at the entire policy framework.”

Since the administration implemented sweeping global sectoral and reciprocal tariffs, economists have been combing through the monthly CPI report to determine whether they are influencing prices.

The data for tariff-sensitive items appear to show the levies moving through the supply chain.

New vehicles jumped by 0.2 percent, while motor vehicle parts and equipment increased by 0.5 percent.

Apparel costs advanced 0.7 percent. Men’s and boys’ apparel climbed 1.5 percent, and women’s and girls’ apparel increased 0.4 percent. Footwear swelled 0.9 percent.

On the technology front, televisions declined 1.1 percent, smartphones tumbled 2.2 percent, and computers jumped 0.2 percent.

Canned fruits and vegetables—imported from Spain, China, Mexico, and India—rose 0.6 percent.

After three consecutive months at 3.8 percent, the annual services inflation rate eased to a four-year low of 3.6 percent.

Market Reaction

The numbers were positive for the financial markets and investors expecting interest rate cuts this year, Jay Woods, chief global strategist at Freedom Capital Markets, said in a note emailed to The Epoch Times.

“The delayed CPI numbers came in slightly cooler than expected, which is good news for the markets and those hoping for cuts next week and again in December,” he said.

U.S. stocks extended their gains following the September CPI report, with the leading benchmark indexes firmly in the green.

The blue-chip Dow Jones Industrial Average and the tech-heavy Nasdaq Composite Index added more than 200 points. The broader S&P 500 rallied 0.6 percent.

The U.S. Treasury market was mixed, with yields on short-term government bonds slipping amid lower rate expectations among investors.

The benchmark 10-year yield was flat at around 3.99 percent.

Despite last month’s modest increases, inflation is not spiraling out of control, according to Woods.

“The good news is that while inflation is ticking higher, it is not running away,” Woods said. “Today’s number is what the Fed and the market needed heading into next week’s meeting. This gives them ample room to cut and remain dovish.”

Only Data in Town

Due to the U.S. government shutdown—now in its 24th day—federal agencies have not released any key data to assess the economy’s health. This made the September CPI report a crucial reading for inflation, especially with the Federal Reserve convening its two-day policy meeting next week.

The major challenge moving forward will be data collection efforts for the October figures.

The Bureau of Labor Statistics called workers back to complete the inflation report for the Social Security Administration, which can calculate cost-of-living adjustments. Other work for this month’s numbers, whether employment or prices, has been halted.

The economic impact of the shutdown remains unknown, but financial markets and policymakers will be flying blind absent the data, Bankrate financial analyst Stephen Kates said.

“While September data collection was completed normally and is still pending release, October data collection has been suspended,” Kates said in a statement to The Epoch Times. “The longer the shutdown continues, the larger our blind spot will be on current economic conditions.”

Fed Chair Jerome Powell recently acknowledged the difficulties officials may have in examining current economic conditions. He stated that the central bank can rely on alternative private-sector data to get a sense of how the economy is performing.

Regional central banks have also established their own sets of indicators.

The Chicago Fed, for instance, publishes a biweekly report assessing labor market indicators. St. Louis Fed President Alberto Musalem recently confirmed that his team will create a similar report.

Monetary officials can also rely on the Beige Book—a periodic summary of economic conditions across the institution’s 12 districts—to gauge business activity, labor markets, inflation, and other factors.

The October and potentially November CPI numbers may not be entirely accurate when they are released.

Early estimates from the Cleveland Fed’s Inflation Nowcasting Model suggest the annual inflation rate will be 3 percent and core CPI, which strips out volatile energy and food prices, will be 2.9 percent.

The Fed is still overwhelmingly expected to lower interest rates by a quarter point at the October and December Federal Open Market Committee (FOMC) policy meetings, according to the CME FedWatch Tool.