US import prices fell by the most in nine months in September, driven by a sharp drop in energy costs, signaling a benign inflation outlook that keeps the Federal Reserve on track to continue cutting interest rates. According to the Labor Department, import prices excluding fuel barely rose over the past three months, offering further evidence that inflationary pressures are muted.
Import prices slipped 0.4% last month, the largest drop since December 2023, after a revised 0.2% decline in August. The 12-month decline was 0.1%, marking the first annual drop in seven months.
The cost of imported fuels and lubricants plunged 7%, driven by a 7.1% fall in petroleum prices and a 14.5% drop in natural gas prices. Excluding fuel, import prices inched up 0.1% for the third consecutive month.
Food prices also declined 1.5%, largely due to a 12.2% drop in vegetable prices. Excluding both fuel and food, core import prices rose 0.3%, signaling stable underlying costs.
The data supports the Fed's decision to ease interest rates, with expectations of another 25 basis point cut in November, following a half-percentage-point reduction in September. The Fed had previously raised rates by 525 basis points in 2022 and 2023 to combat rising inflation.
In export markets, prices fell 0.7% in September, with nonagricultural exports driving the decline, despite a 0.6% rise in agricultural goods.
Economists, like Conrad DeQuadros of Brean Capital, agree that import prices are not a significant hurdle in the Fed's mission to return inflation to its 2% target, as the economy remains resilient.
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