Price pressures edged up in September, but at a slower-than-expected pace, with key inflation metrics reinforcing the Federal Reserve's current rate-cut path and fueling investor optimism on the stock market.

The headline CPI rose 3% year-over-year, according to Friday’s report from the Bureau of Labor Statistics — released after a nine-day delay due to the government shutdown.

While it marked the highest annual reading since January, the figure came in slightly below economists' expectations of 3.1%, and only a modest rise from August's 2.9%.

On a monthly basis, the CPI increased 0.3%, slowing from August's 0.4% gain and again falling short of the consensus forecast.

The core CPI, which excludes volatile food and energy components, also surprised to the downside. Core inflation eased to 3% year-over-year, down from 3.1% in August and lower than the expected unchanged reading.

What’s Behind September Inflation Numbers?

Gasoline prices were the biggest driver of the monthly increase. The energy index rose 1.5%, led by a 4.1% jump in gas prices. Food prices also edged up, with the overall food index climbing 0.2%, driven by a 0.3% increase in groceries and a 0.1% rise in restaurant meals.

Still, the broader measure of inflation — the index for all items excluding food and energy — posted a more modest 0.2% increase, down from 0.3% in the previous two months.

Within this core basket, prices for shelter, airfares, recreation, household furnishings and apparel rose modestly.

Offsetting those gains, declines were recorded in used car prices, motor vehicle insurance and communication services, all of which helped tame overall inflation momentum.

Markets Rise As Fed Rate-Cut Outlook Holds

Traders who had been positioning for the Fed to stay on its easing path found validation in Friday's data.

Prior to the report, futures markets were pricing in a near-certainty of a 25-basis-point rate cut at the Oct. 30 meeting, with a 90% probability of another cut in December. The September CPI print reinforced those expectations.

U.S. equity futures rose sharply after the release, with contracts on the S&P 500 gaining 0.7% and the Nasdaq 100 up 0.9%, putting both benchmarks on course to open at fresh all-time highs.

Intel Corp. ( INTC ) was the top-performing S&P 500 stock in the pre-market on Friday, up nearly 6%, following better-than-expected earnings.

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Image created using artificial intelligence via Midjourney.