The U.S. Consumer Price Index came in a little stronger than expected in September, but not enough to excite economists.

The U.S. CPI rose 0.4%, compared with consensus expectations of a 0.3% rise. However, core prices rose 0.2%, in line with expectations.

“Even though the headline number was above expectations, it was still smaller than a year ago, helping trim the annual inflation rate to 2.6% from 2.7% in August. The U.S. inflation rate is roughly in line with European and Canadian results,” says BMO Nesbitt Burns.

The latest monthly increase was led by a 8.6% spike in gasoline prices, which has since faded away. “Even though today’s report on consumer prices showed some gasoline price gouging in the days following September 11th, the slow pace of the U.S. economy expected over the balance of the year will keep inflation pressures in check,” suggests TD Bank economists.

TD says that, “the Federal Reserve’s inflation worries can easily be left on the backburner for at least the next few months while attention is focused on reviving the struggling U.S. economy and maintaining calm in financial markets.” There is little in today’s report that will stand in the way of further interest rate cuts from the U.S. Federal Reserve in the coming months, it says.

“Notwithstanding September’s slightly firmer-than-expected headline, the powerful forces of disinflation acting on the economy are likely to maintain the upper hand in coming months, adding to the Fed’s scope for easing,” agrees CIBC World Markets. “We continue to look for a further 50 basis point cut in the federal funds rate through year end.”

“It is entirely normal for core inflation to remain firm early in a recession. However, as a downturn proceeds, large declines in inflation typically take place. The Fed and the markets are willing to wait patiently because a downward trend in inflation is now highly likely,” says BMO.

TD says that more interest rate cuts seem necessary to revive the U.S. economy. “All told, the risk of slower economic demand remains a greater near-term risk than rising inflation, hence the Fed is likely to deliver another 50 basis point interest rate cut in November followed by a 25 basis point cut in December.”