US Inflation Climbs to 3.7% in September as Gasoline Jumps 9.1% in a Month

Inflation in the United States picked up speed in September, with consumer prices rising 3.7% from a year earlier, according to data released by the Labor Department on Wednesday. The reading was up from 3.4% in each of the previous two months and came in above the 3.6% that economists had forecast.

On a monthly basis, the consumer price index rose 0.6%, in line with expectations. The surprise was in the details, where both the energy-driven headline and the underlying measure ran warmer than anticipated.

Energy did most of the damage

Gasoline was the single largest driver. Pump prices rose 9.1% in September from August and accounted for more than half of the month's overall increase. Over the past year, gasoline is up 34.2%, and the broader energy index has climbed 20.4%.

The surge traces back to the war involving Iran and the continuing conflict in Ukraine, both of which have kept global oil supply under strain for months. The national average price of a gallon of regular gasoline stood at about $4.33 on Wednesday, according to motoring group AAA, compared with roughly $2.98 before the Iran war began. Diesel, which touched a record in late September, was averaging about $6.29 a gallon.

Expensive diesel matters well beyond the fuel pump. It raises the cost of moving goods by truck and rail, and those costs tend to show up later in the prices of groceries and other everyday items.

Core prices are rising too

Core inflation, which strips out food and energy, rose 0.3% for the month and 2.6% over the year. Both figures were a notch above estimates of 0.2% and 2.5%, and the annual rate was up from 2.4% in August.

That is still well below the headline number, but the direction is what worries economists. One Wall Street analyst described the report as clearly hot and said high energy prices, sustained for this long, were beginning to filter into the wider economy.

Elsewhere in the basket, food prices were unchanged on the month and 2.5% higher than a year ago. Shelter costs rose 0.4%, and used car and truck prices increased 0.7%.

A problem for the Fed and for the White House

For the Federal Reserve, the report adds weight to the case for another rate increase. Markets had been watching the September figures to judge whether the next hike is imminent or can wait. A firmer core reading strengthens the argument that energy costs are no longer staying in their own lane.

The timing is also politically awkward. The data arrives three weeks before the US midterm elections, and polling shows a large majority of Americans see prices as the most important factor in how they judge the economy. The administration has defended a recent deal easing restrictions on Russian diesel shipments as a way to bring fuel costs down, though critics in Congress have attacked it as a concession to Moscow.

Why it matters beyond the US

Higher US inflation tends to mean higher US interest rates for longer, which supports the dollar and can pull investment away from emerging markets, including India. Indian markets had already turned cautious ahead of the release, and the outcome is likely to feed into global currency and bond moves in the coming sessions.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.