ARI SHAPIRO, HOST:
It was good news and bad news about inflation today. The annual inflation rate in September was the lowest it's been in more than 3 1/2 years, but inflation cooled less than many forecasters had expected. Today's report is part of a calculation behind the cost-of-living increase that Social Security recipients will get next year. And to explain this, NPR's Scott Horsley is here. Hi, Scott.
SCOTT HORSLEY, BYLINE: Hi, Ari.
SHAPIRO: OK, so inflation is coming down, but not as fast as many people would like. What do these numbers today tell us?
HORSLEY: Overall, prices in September were up 2.4% from a year ago. That's down from the previous month but still higher than a lot of economists had predicted. Rising rents and grocery bills last month more than offset a drop in the price of gasoline. Of course, people buy groceries every week, so that's a constant reminder about these high prices. Supermarket prices had been pretty stable in recent months, but they jumped again in September, led by another big increase in the price of eggs. Car insurance premiums also continue to climb. They're up more than 16% over the last year. Eli Tavares, who lives outside Boston has cut back on his insurance coverage but says his insurance bills just keep going up.
ELI TAVARES: It just feels like insurance is just looking for an excuse to raise rates, just making the cost of owning a car even more expensive than it already is. You just got to pay up if you want to drive.
HORSLEY: Tavares complains that his rent is also rising. On average, workers' wages have been going up faster than prices for 17 months now, so workers are starting to catch up after several years of high inflation. But Tavares says it doesn't feel like his paycheck is keeping up with expenses.
SHAPIRO: So that's the story for workers. What about retirees? What kind of cost-of-living adjustment can they expect to see next year?
HORSLEY: Well, Social Security benefits are adjusted every January based on the average inflation rate the previous July, August and September. So after today's inflation numbers came out, the government announced that Social Security benefits will increase by 2.5% next year. That amounts to an extra $47 a month in the average retirement check. The increase is supposed to help benefits keep pace with inflation. But Lisa Siegel, who's a retired legal secretary in Los Angeles, says it doesn't feel like enough.
LISA SIEGEL: It's hair-raising. Life gets more expensive all the time - 2.5% sounds like lunch money.
HORSLEY: Now, in fact, Ari, the government does calculate a separate inflation yardstick just for seniors who tend to spend more on healthcare, for example, and less on transportation than younger people. If that measure were used to set the cost-of-living increase, it would be more like 3% next year rather than 2.5%. As it is, Siegel says she has to keep a close eye on her spending, although she admits her cat is still eating pretty well.
SIEGEL: Well, I have to tell you, I tried the cheap kibble from Kirkland - Costco - and she stopped eating. She lost a lot of weight. So I had to put her back on the fancy stuff. We are slaves to our pets.
HORSLEY: The National Committee to Preserve Social Security and Medicare says it's a good thing that retirees get this automatic cost-of-living increase, but it would be better if the COLA better matched their actual expenses.
SHAPIRO: I'm kind of obsessed with the fat-cat economic indicator.
HORSLEY: (Laughter).
SHAPIRO: What does today's inflation report mean for the Federal Reserve, as it thinks about how quickly to lower interest rates?
HORSLEY: Well, rates will probably keep coming down, but maybe not as fast as we had expected. Yesterday, we got the minutes from the most recent Fed meeting, and they show policymakers were kind of divided over that aggressive half-point rate cut we saw last month. A number of policymakers would have preferred to go with a smaller, quarter-point cut. And the combination of today's report showing somewhat sticky inflation and last week's report showing stronger than expected job growth in September is likely to make the central bank even more cautious about cutting interest rates in the months to come. We still expect a rate cut, but probably a more modest, quarter-point cut in November.
SHAPIRO: That is NPR's Scott Horsley. Thank you.
HORSLEY: You're welcome.
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