RALEIGH – September’s inflation report released Thursday had a bit of everything, according to N.C. State economist Dr. Mike Walden. A combination of “good, bad, and uncertain news.”

The good news was straightforward: a lower monthly inflation rate in September vs. August.

“But compared to September 2022, the year-over-year inflation rate was 3.7%, a disappointing number since it was unchanged from the August 2022 to August 2023 rate,” Walden told WRAL TechWire.

Another positive sign was a drop in the “core inflation rate”, which leaves out “volatile” items like food and fuel. This rate was lower on a year-over-year basis in September, compared to August.

“This is the inflation rate that receives strong attention from the Federal Reserve,” explained Walden. “Of course, the bad news is that since we still have to eat and drive, most people put little value on an inflation measure that excludes food and gas, particularly when the prices of both rose in September.”

As for the uncertainty, that comes in when trying to figure out what the Fed will do with these number when they meet at the end of the month.

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“If they focus on the continuing downward trend in the core inflation rate, then another rate hike is unlikely to occur,” said Walden. “But if they focus on the fact that the all-item (including food and fuel) inflation rate has not declined on a year-over-year basis since June, then they might decide a further rate hike is needed to slow-down both the job market and consumer spending. So once again, we’re in another ‘watch and see” situation with the Fed.”

Current inflation levels for the previous 12 months ending in August are at 3.9%, nearly double the 2% rate the Fed is targeting. But there are several forces pushing that number down, including the re-emergence of student loans and a cooler labor market.

The next Fed meeting will run October 31-November 1.