Dive Brief:
- The Consumer Price Index rose in September at a higher-than-forecast annual rate of 3.7%, fueled primarily by a 9.1% surge in the price of gasoline, the Bureau of Labor Statistics said Wednesday.
- The CPI index for items excluding food and energy last month increased 2.6% on an annual basis compared with 2.4% in August, suggesting that soaring energy prices are bleeding into a broad range of consumer items as the war with Iran persists beyond seven months.
- “Inflation is cooking with gas,” Harris Financial Group Managing Partner Jamie Cox said. “It is abundantly clear where the inflation impulse originates, but two wars need to end before we get any relief,” he said in a note.
Dive Insight:
The report of accelerating inflation increased expectations that the Federal Reserve on Oct. 28 will push up the main interest rate by a quarter percentage point for the second consecutive month.
Traders in interest rate futures on Wednesday increased the odds that policymakers will raise the main interest rate at their next meeting to 37% from 22% yesterday, according to CME Group’s FedWatch tool.
Consumer confidence in the Fed’s long-term success in combatting price pressures has fallen this year as policymakers have struggled to make steady progress in curbing inflation to their 2% goal.
Consumers this month expect inflation during the coming decade to average around 2.7%, the highest level since July 2007, the Cleveland Fed said Wednesday.
Fed officials closely track expectations for inflation, believing such sentiments can become self-fulfilling. Surveys by the Conference Board and New York Fed last month — and by the University of Michigan this month — also showed that households expect price pressures to persist.
“I am concerned that the recent acceleration in inflation — after what soon will be five and a half years of it above the FOMC's [2%] target — will lead consumers, investors and price-setting businesses to revise up their expectations for future inflation,” Fed Governor Christopher Waller said in a speech Thursday, referring to the policy-setting Federal Open Market Committee.
Fuel oil prices increased in September more than gasoline, soaring 15.3% during the month and 74.2% compared with September 2025, the BLS said.
Higher fuel prices pushed up the price of transportation services 0.6% last month — 0.1 percentage point higher than in August — for a 2.7% gain since September 2025, according to the BLS.
Inflation for several months has outpaced wage gains, making affordability a front-burner political issue with the approach of the Nov. 3 mid-term elections.
“Every time they want to try and get me, they say affordability,” President Donald Trump said Tuesday, referring to Democrats, during a speech before claiming that he has eased the problem “very substantially.”
After the release of the CPI data on Wednesday, Democrats upbraided Trump for rising prices.
“Donald Trump’s ‘Golden Age’ means never ending, higher prices for the American people while he gets a ballroom and billionaires get tax cuts,” Senate Minority Leader Chuck Schumer, D-N.Y., said on X.
