A MARTÍNEZ, HOST:
Retirees and others who depend on Social Security will get a smaller cost-of-living increase next year. Cost of living is still going up, but not as fast as it had been. We got an update this morning on September's inflation rate with NPR's Scott Horsley. Scott, inflation has been cooling off in recent months, although prices are still climbing maybe a little bit faster than most of us would like. So what did today's numbers show?
SCOTT HORSLEY, BYLINE: They show a little more moderation in price increases. Consumer prices in September were up 3.7% from a year ago. That's similar to what we saw in August. The so-called core inflation rate, which strips out food and energy prices, was 4.1% last month. That's a little bit lower than the month before. Prices rose four-tenths of a percent between August and September, and that's a smaller monthly increase than we saw the previous month. Rising rents and gasoline prices were partially offset in September by falling prices for back-to-school clothes and used cars.
MARTÍNEZ: All right. So what does this mean, then, for the Federal Reserve? Are interest rates slightly - likely, maybe, to go even higher?
HORSLEY: You know, at their last meeting in September, Fed policymakers hinted that there could be one more quarter percentage point interest rate hike in the pipeline before the end of this year. But for now, betting markets think the Fed might just take a wait-and-see approach. We've got the next Fed meeting coming up at the very end of this month with an interest rate announcement on November 1. For the moment, investors are betting that the Fed will leave rates where they are and just see if inflation continues to come down on its own.
MARTÍNEZ: OK. Now, I know that Social Security benefits, they're adjusted each year to keep pace with these price increases. What can beneficiaries expect next year?
HORSLEY: We found out this morning that next year's cost-of-living increase will be 3.2%. That's based on the average inflation rates for July, August and September, although the cost-of-living adjustment is calculated using a slightly different price index than the CPI that we all focus on each month. Those increased payments will start in January, and that is welcome news for people like Regina Wurst.
REGINA WURST: Any increase is very helpful. I'm 72, and I live in California, so the cost of living is quite high.
HORSLEY: Wurst receives a little over $1,500 a month in Social Security, and she says most of that goes for rent on the house that she shares with nine other family members. She's also raising two of her grandchildren.
WURST: I was just today trying to wonder, how am I going to buy school clothes for my 10-year-old granddaughter? She's really asking for more clothes. She wears the same thing every day.
HORSLEY: You know, for the average Social Security recipient, that 3.2% cost-of-living adjustment works out to about $55 more each month. That is a much smaller increase than the 8.7% bump that Social Security recipients got at the beginning of this year. But as you said, the cost of living isn't going up as fast as it was last year, and as Wurst and others told me, every little bit helps.
MARTÍNEZ: Yeah. Absolutely. I'm sure every little bit helps to pay the bills. What about Social Security's bills, though, because how long can the government keep up with these payments?
HORSLEY: Yeah. Social Security's finances are OK for now, but we do have a long-term demographic challenge as more baby boomers retire and there are fewer workers paying into the system for each person receiving benefits. About a decade from now, the Social Security trust fund is expected to run out of money. And unless something is done to address that, everybody who receives Social Security can expect to see their benefits cut when that happens. Right now, the cut is forecasted to be about 20%. AARP is urging Congress to come up with a bipartisan fix to protect both current and future retirees, but given what we've seen in Congress lately, that doesn't look likely any time soon.
MARTÍNEZ: NPR's Scott Horsley. Scott, thanks a lot.
HORSLEY: You're welcome.
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