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
Higher inflation and elevated interest rates typically weigh on corporate profitability, yet corporate margins continue to climb to record highs. While that strength is evident both in the U.S. and abroad, U.S. outperformance versus Europe is now the widest on record. Stronger margins have helped contribute to better-than-expected earnings and reinforce U.S. equity leadership. The question now is whether that strength can persist?
Higher interest rates have become a frequently cited risk to corporate earnings and the economy. The conventional thinking is straightforward: when borrowing costs rise, companies face higher interest expenses, profits come under pressure, and economic growth slows. While there is truth to that relationship, the current cycle may differ from investors’ expectations.
Both the dot-com era and the rise of artificial intelligence suggest that early productivity data can understate the actual economic impact of transformative technologies. In the case of the internet, later revisions to productivity gains surpassed early estimates. The same may prove true for AI, implying stronger support for growth.
History of stocks after the Fed hikes
History of stocks after the fed hikes
Sticky inflation and resilient growth have revived monetary tightening, increasing the risk of higher-for-longer rates and near-term volatility. We continue to believe economic resilience and strong corporate profits should continue to provide a favorable backdrop for stocks, and would use periods of market weakness to add selectively to equities. Additionally, owning real assets can help hedge against inflation.
