**Fed Likely to Cut Rates Despite Modest September Inflation Rise**

Inflation in the United States saw a modest increase in September, a development unlikely to hinder the Federal Reserve's anticipated interest rate cut. According to government data released on Thursday, the Fed's preferred Personal Consumption Expenditures (PCE) index edged up 0.2% last month, aligning perfectly with economists' projections surveyed by The Wall Street Journal.

Over the last year, the overall inflation rate decelerated to 2.1% from a previous 2.3%, hovering slightly above the Fed's target of 2%. However, the core inflation rate, which excludes volatile food and energy prices, rose by a more substantial 0.3%, marking the largest increase in six months. The core rate serves as a crucial indicator for the Federal Reserve, as it is often seen as a more accurate predictor of long-term inflation trends.

Economists, including Richard Moody of Regions Financial, stress that the Fed will remain vigilant despite these figures. "Even if headline PCE inflation hits 2.0%, that doesn't mean the [Fed] will declare victory and go home," Moody remarked.

Annually, the core inflation rate has been steady at 2.7%. This stability has led to broader expectations that the central bank will proceed with another rate reduction next week, shortly after the presidential election. Lower price increases have given the Fed the confidence to ease borrowing costs, initially raised to combat inflation aggressively. The central bank's aim is to avoid a labor market downturn that could lead to rising unemployment.

However, should the core rate of inflation remain stubbornly high, the Fed may adopt a more cautious stance in its future rate adjustments.