WASHINGTON, Oct. 9, 2025 — High inflation in times of a government shutdown, with the backdrop of developments in the geopolitical situation, is a factor America’s small enterprises are closely monitoring.

The year so far has been eventful for SMEs, first keeping them busy with the fine print of tariffs and later confronting economic uncertainty caused by trade wars.

Food inflation on the higher side has been a pressing issue, with economists suggesting that it may take some more time before supply-side cost pressures reduce enough to tame inflation.

As inflation remains “sticky,” minutes of the Fed’s September 16-17 meeting, released on Wednesday (October 8), revealed that central bank officials did agree that risks to the U.S. job market had increased enough to warrant an interest rate cut, but remained wary of high inflation amid a debate about how much borrowing costs were weighing on the economy, reported Reuters. Notably, last month an index that measures the confidence of small-business owners surged to its highest level since 2017. Food inflation has remained on the higher side for several months, with the spike in food prices seeing fresh and dry vegetables costlier by about 40 per cent in July.

Inflation moved higher in August as the price of gas, groceries, hotel rooms, and airfare rose, along with the cost of clothes and used cars. Consumer prices rose 2.9 per cent in August from a year earlier, the Labour Department said, up from 2.7 per cent the previous month and the biggest increase since January.

What Made Fed’s September Meeting Important

High Inflation Dampener: The core prices that rose 3.1 per cent in August, similar to the July figures, excluded the volatile food and energy categories, core prices. However, both figures remained above the Federal Reserve’s two per cent target.

Ahead of the Fed’s September meeting, it was the last reading indicating economic indicators, as policymakers were widely expected to cut their short-term rate to about 4.1 per cent from 4.3 per cent.

Going forward in September, Fed officials held deliberations over two days, the minutes of which were shared on Wednesday (October 8).

“Most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased,” said the minutes, which presented the key takeaways of the emerging discussion between Fed officials most concerned about protecting the labor market and relatively unconcerned now about inflation, including new Governor Stephen Miran, and those who see signs of inflation remaining persistently above the U.S. central bank’s two per cent target.

Varying Perspective at Fed: As per the minutes of the Fed meeting, “a few participants” said there was “merit” in keeping the policy rate steady, while at the other end of the spectrum “one” of them advocated a larger half-percentage-point cut, reported Reuters.

After a senior White House economic adviser opposed a larger half-percentage-point cut, with more to follow at upcoming meetings, Governor Miran has been formally out of action.

“There’s a lot of squawking and squabbling at the Fed. Where they stand depends on whether they fear the risk they know, a slowing labor market, or the risk they don’t know, the possibility of inflation expectations moving higher,” said Brian Jacobsen, Chief Economist at Annex Wealth Management. “Risks to growth are increasing, while risks to inflation remain the same or are falling. If September’s cut was a risk-management cut, it would be hard to argue they shouldn't cut again in October.”

Know More about Internal and External Factors Affecting Inflation

Global geopolitical situation and region-specific political reasons in different nations have been major influencing factors in turning the world economy fragile. With Israel and Palestine having agreed on the Gaza Peace Deal, oil prices in the global market softened on Thursday (October 9). There has been a huge influence of the war in Gaza on oil prices as investors have weighed the potential risk to global oil supply in case the war had spiralled into a wider regional conflict.

Risks driven by global geopolitical and economic uncertainty have been the key catalysts pushing gold's 54 per cent surge this year to a record over $4,000 an ounce, with analysts seeing little to halt the rally.

The yellow metal has jumped twofold over the last two years as investors have sought safety amid risks fuelled by President Donald Trump's trade tariffs, concerns about U.S. dollar strength, Federal Reserve independence, lingering inflation, Russia's war in Ukraine, and sluggish European growth.

International Monetary Fund chief Kristalina Georgieva told Reuters that the U.S. Federal Reserve is likely to lower interest rates this year but will have to calibrate carefully between easing growth prospects and signs that disinflation is stalling.

Georgieva, Managing Director of the IMF, said the U.S. economy had proven resilient and outperformed most expectations with second-quarter growth of 3.8 per cent, and consumer demand was still holding strong despite indications that hiring was not as strong.