Good news on inflation?
Last week’s Consumer Price Index report, a widely used indicator of inflation in the U.S. economy, showed growth of 3% in September, which was above 2.9% in August but less than expected. Despite the modest increase, various categories have shown signs of stabilization. What does this mean for inflation going forward?
3 mins Reading time
Published on 28 October 2025
Last week’s Consumer Price Index (CPI) report, a widely used indicator of inflation in the U.S. economy, showed modest growth from 2.9% on an annual basis in August to 3% in September. Yet, the number came in below analysts’ expectations, helping to allay fears of rising inflation. Consequently, the market ended the week higher.
Though the inflation reading was slightly higher than in August, a look at underlying components is encouraging. Core goods, food and core services ex-shelter have risen since April, but appear to have peaked with readings either unchanged or lower in September. Importantly, shelter, which accounts for 35% of CPI, continues to slow, helping to stabilize inflation.
There is the question of what the impact of tariffs will be on inflation once all potential deals are in effect, but we maintain that the result will be a one-time rise in prices rather than a sustained increase. Our view is that inflation will remain within a range of 2.6% to 3.3% through year end.
829871 Exp : 28 October 2026
YOU MIGHT ALSO LIKE
Although companies benefiting most directly from AI-related capital spending are the main drivers of higher earnings, strength is no longer confined to that group. Earnings across the broader market remain solid and are expected to grow more than 10% this year and next, suggesting the risk of concentrated market leadership may not be founded.
After sluggish job growth in 2025, investors are looking for signs that the labor market may be stabilizing. With consumer spending driving 70% of economic activity, an improving labor market is essential to sustaining economic growth.
Global equities have risen an annualized 11% since 2020 despite repeated shocks, as resilient growth and earnings have helped markets recover from periods of volatility. While the U.S.-Iran conflict poses near-term inflation and growth risks, markets remain constructive as earnings expectations continue to improve.
Rising earnings estimates continue to support equities despite geopolitical and macroeconomic uncertainty. With profit growth broadening across S&P 500 industries, resilient corporate earnings underpin our constructive outlook for the stock market.
