US consumer prices rise 3.7% in September as gasoline jumps 9.1%

Consumer prices rise faster than expected

The Bureau of Labor Statistics reported on Wednesday, 14 October, that consumer prices rose 0.6% in September from August, the sharpest monthly gain in five months. Over the year to September, prices were 3.7% higher, up from 3.4% in August, while analysts had expected a rate of 3.6%. Core inflation climbed 0.3% on the month and 2.6% over twelve months, well above expectations. Housing and rent costs also rebounded unexpectedly after slowing in the spring and summer, adding to the pressure on the index.

Energy costs and the Iran war

The bulk of the increase came from energy, which has risen sharply since the United States went to war with Iran. Gasoline rose 9.1% in September alone and is up 34.2% over the past year, while heating oil climbed 15.3% in the month. Food prices are 2.5% higher over the past 12 months, with fruits and vegetables up 3.7% and cereals and bakery products up 2.1%. The conflict began when the United States and Israel attacked Iran, and businesses say they are passing higher fuel costs along their supply chains.

Fed weighs another rate increase

The Federal Reserve raised its policy rate in September for the first time in more than three years, to between 3.75% and 4%. Sixteen of the 18 committee members projected at least one more increase before the end of the year. The Fed's Beige Book survey said prices had picked up again in some parts of the country, hiring was scarce and firms expected only modest growth. Cleveland Fed president Beth Hammack said persistent inflation could require a tighter policy, and markets do not expect a move at the 27-28 October meeting. The most likely date for a rate change is 8-9 December.

Voters and grocery prices ahead of the midterms

Grocery shoppers in Iowa, Ohio, Maine and Michigan who backed Donald Trump in 2024 gave mixed views on whether he is to blame. Republican strategist Jason Roe, based in Michigan, said the figures reinforce the public mood about the economy.

It puts a number on the sentiment that is driving this election

Jessy Hakizimana, a 44-year-old Iowa business owner, said price rises had changed how he shops and made him question his vote.

I don't think he has lowered prices for anything.

White House spokesman Matthew Middleton defended the administration's handling of the economy and said the president has a strong pro-growth agenda. A Pew Research Center study found that close to half of Americans are having trouble paying for basic needs.

Debt, growth and retirees

IMF managing director Kristalina Georgieva, speaking in Bangkok, said the United States cannot rely on growth alone to reduce public debt above $40 trillion and needs measures to contain the deficit. Treasury Secretary Scott Bessent argues that growth above 3% combined with spending cuts would be enough. Trump continues to say the economy has never been stronger. Retirees will receive a 3.6% increase in their Social Security benefits next year.