Inflation update: US consumer prices accelerated again in September, with annual inflation climbing to 3.7% and deepening Americans’ worries about the cost of living just weeks before the November 3 midterm elections.
The Consumer Price Index rose 0.6% in September from the month before, according to the Bureau of Labor Statistics, after a 0.4% gain in August. That pushed the yearly rate up from 3.4% in August and above the 3.6% economists had expected.
Gasoline Drives the Jump
Energy was the biggest culprit. Gasoline prices jumped 9.1% in September alone and accounted for more than half of the monthly increase. Compared with a year ago, gas is up about 34%, and energy costs overall are up about 20%. CNBC reports that the rise in inflation is largely tied to the Iran war, which has pushed up prices for oil and for fuels refined from it, including gasoline, diesel and jet fuel. Airline fares are up 22% over the past year, and hotel prices are up more than 4%.
Moody’s chief economist Mark Zandi said the overall report shows inflation is uncomfortably strong and that the war’s fingerprints are all over it.
It Is Not Only Fuel
Core CPI, which strips out food and energy, rose 0.3% on the month and 2.6% from a year earlier. Both readings came in slightly hotter than forecasts of 0.2% and 2.5%. Carson Group strategist Sonu Varghese noted that core inflation ran at a 3.7% annualized pace in September and warned that the full effect of higher diesel prices and the AI boom has yet to show up in the data.
- Housing: Rents rose 0.4% in September, the fastest monthly pace in five months, as high mortgage rates of around 7.5% keep many would-be buyers renting.
- Services: Prices rose for hotel stays, hospital visits, nursing home care, rental cars, tuition and sporting events.
- Cars and clothing: Used car and truck prices rose 0.7% on the month, and apparel prices are up 3.4% from a year ago, a category sensitive to tariffs.
- Groceries: Food prices were flat on the month and are up 2.5% over the year. Egg prices have fallen about 20% from a year ago, and milk prices dropped 2.0% in September.
Why Americans Are Still Worried
Even when the pace of price increases slows, prices do not fall back. Inflation has been above the Federal Reserve’s 2% goal every month since March 2021, so households are paying a much higher price level for rent, insurance, food and fuel than they were a few years ago. Economists say rising prices are eroding workers’ pay gains and compounding affordability concerns. Consumer sentiment has also sunk: the University of Michigan’s index fell to its second-lowest reading on record in September.
Borrowing costs add to the strain. Mortgage rates near 7.5% have frozen the housing market, and markets are now bracing for the possibility of another Federal Reserve interest rate increase later this month, which would raise the cost of credit cards, car loans and mortgages further.
Watch: Breaking Down the September CPI Report
CBS News explains how energy costs pushed inflation to 3.7% in September:
A Political Test for the White House
With the midterms days away, the report is another blow for President Donald Trump and congressional Republicans, who face voters frustrated by the cost of living. On the same day, the Social Security Administration announced a 3.6% cost-of-living adjustment for benefits in 2027, an increase that reflects how much prices have climbed.
What to Watch Next
- The Federal Reserve’s next rate decision, expected later this month.
- Whether gasoline and diesel prices ease or climb further.
- How voters weigh affordability at the polls on November 3.
This is a developing story and will be updated as more information becomes available. Sources: Bureau of Labor Statistics, CNBC, CNN, USAFacts.