Inflation Jumps Higher In Final Report Before Midterm Elections

Inflation accelerated in September as surging gasoline prices drove consumer costs higher, delivering another blow to Republicans’ chances to retain both the House and Senate in November’s election.

The Consumer Price Index (CPI) rose 3.7% from a year earlier, up from 3.4% in August, according to data released Wednesday by the Bureau of Labor Statistics (BLS). The report landed less than three weeks before November’s midterm elections, as polling showed President Donald Trump and Republicans struggling with voters over inflation and the economy.

Gasoline prices jumped 9.1% in September, accounting for more than half of the monthly increase in consumer prices. Gas prices were 34.2% higher than a year earlier, while fuel oil prices surged 74.2% over the same period.

Consumer prices climbed 0.6% in September alone, exceeding economists’ expectations and raising the prospect of another Federal Reserve interest rate hike as Americans contended with mounting financial pressures.

The broader energy index climbed 5.2% during September and 20.4% over the past year, reflecting the continued fallout from disruptions to global energy supplies amid the conflict involving Iran.

An August Reuters/Ipsos poll found that 47% of registered voters considered the cost of living the single most important factor in deciding their congressional vote, while 71% of Americans disapproved of Trump’s handling of the issue.

A separate Gallup poll released Tuesday found that 51% of Americans trusted Democrats more to keep the country prosperous, compared with 37% who favored Republicans. The 14-point Democratic advantage was the party’s largest advantage since 2007.

Inflation also extended beyond the gas pump. The index excluding volatile food and energy prices, commonly known as core inflation, rose 0.3% in September and 2.6% over the previous 12 months, up from 2.4% in August.

Housing costs continued climbing, with the shelter index rising 0.4% during September and 3.2% over the past year. Used cars and trucks increased 0.7% over the month, while airline fares climbed 1.2% and recreation costs rose 0.5%.

Food prices offered some relief, remaining unchanged overall in September. Grocery prices slipped 0.1%, although the broader food index remained 2.5% higher than a year earlier.

The inflation figures complicated the Federal Reserve’s effort to rein in prices without further weakening the labor market. The central bank raised its benchmark interest rate by a quarter percentage point in September, its first increase since 2023, bringing the target range to 3.75% to 4%.

Following Wednesday’s report, interest rate futures traders raised the probability of another increase at the Fed’s Oct. 27-28 meeting to nearly 45%, according to the Financial Times, up from approximately 22% before the data was released.

The latest figures followed a disappointing September employment report showing employers added just 29,000 jobs while the unemployment rate reached 4.2%, leaving policymakers confronting persistent inflation alongside signs of a slowing labor market.

Financial markets reacted sharply to the inflation data, with Treasury yields rising and stock futures falling as investors reassessed the likelihood of additional Fed tightening.

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