No Evidence of Tariff Inflation. Interest-Rate Easing Remains on Track.
- Ed Sullivan
- Oct 24
- 2 min read
Updated: Oct 26
Market Update
The September Consumer Price Index (CPI) came in slightly better than anticipated — at 0.3% month over month and 3.0% year-over-year. While the inflation rate remains above the Federal Reserve target rate of 2.0%, it did not reflect any significant tariff-related inflation that many had expected. If even small progress toward the target rate materializes in subsequent reports, it will likely signal a continued easing in monetary policy.
A 25-basis point (BP) cut is expected to be decided at next week’s Fed meeting. Tamer inflation, in the context of a slowing economy, likely suggests further cuts lie ahead. Keep in mind, Trump’s appointment of a new Federal Reserve Chairman in June and monetary policy easing is expected to accelerate in 2026.
In this context, near-term Treasury yields could edge slightly lower with mortgage rates stabilizing around 6.3 – 6.5%. It would then provide modest relief to borrowers - signaling to potential homebuyers that financial conditions are no longer tightening. Keep in mind, the single-family sector is expected to lead the recovery in construction activity. In the context of gradually easing inflation and interest rates, the timing for the potential recovery of construction is expected to begin by mid-2026.
On a separate note, the Federal Government shutdown is now in its fourth week with no end in sight. It will have an impact on fourth-quarter, real GDP growth. According to the Philadelphia Federal Reserve Survey of Professional Forecasters, fourth-quarter growth is expected to average 1.4% growth. That estimate does not include the shutdown. Subtracting out that impact, it leaves fourth-quarter, real GDP growth at 0.9%. While much of this loss will be recaptured later, the longer the shutdown endures, the greater the potential for permanent GDP losses.
About The Sullivan Report
The Sullivan Report delivers subscription-based economic forecasts, news, and market updates tailored to the cement, concrete, construction, and aggregates industries. Its flagship publication, the Cement Outlook, is released three times a year and features 5-year forecast projections, expert analysis, and actionable insights to support informed decision-making and long-term strategic planning amid an evolving economic landscape.
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