Inflation rose to 3.7% last month in last snapshot of consumer prices before the midterms
By Alicia Wallace, CNN
(CNN) — It’s not just gas.
It’s the car repair, the doctor’s visit, the plane ticket, the computer upgrade, the new clothes.
Inflation rose faster than expected last month, with price pressures extending well beyond the pump, new data showed Wednesday.
The latest Consumer Price Index showed that prices rose 0.6% from August, bringing the annual rate of inflation to 3.7%, up from 3.4%, according to new Bureau of Labor Statistics data.
Economists were expecting CPI to increase 0.6% on a monthly basis and 3.6% annually.
Gas prices, which rose 9.1% in September, accounted for more than half of the monthly increase, according to Wednesday’s report, which is the last look at consumer prices before the midterm elections.
“You see the energy crisis causing used car prices to rise, and airfare prices to rise, and recreation costs to rise; and on top of that, you’ve got medical care and apparel also rising,” said Heather Long, chief economist at Navy Federal Credit Union. “So, it’s this more broad-based problem than just a gas price spike.”
And the upward trajectory of price hikes is only further compounding affordability concerns for Americans: September marks the sixth month that inflation has wiped out workers’ wage gains.
A closely watched gauge of underlying inflation also ran hot last month: Core CPI, which excludes volatile food and energy prices, rose 0.3% from August and 2.6% from a year earlier.
Housing-related inflation, which is captured in the weighty “shelter” category, rose 0.4% from August, the fastest monthly rate in five months, BLS data shows.
Shelter-related price hikes have been on a disinflationary path for more than three years; however, economists have questioned how much further those prices could slow as low inventory and high interest rates weigh on the housing industry.
Economists were expecting core inflation to slow to 0.2% and for the annual rate to tick up to 2.5% from a five-year low of 2.4%.
The energy shock from the Iran war is keeping inflation uncomfortably high, eroding Americans’ pay gains and further compounding affordability concerns.
Inflation has now outpaced wage growth for six months in a row.
Wednesday’s data puts the Federal Reserve further from its 2% inflation target (measured by the Personal Consumption Expenditures price index) and could prompt policymakers to hike interest rates again if price pressures persist.
The broadening of price pressures beyond the pump “bolsters the case for additional rate hikes,” Jeff Schulze, head investment strategist for Franklin Templeton Institute, wrote in a note Wednesday, but noted that recent commentary from Fed officials suggests the bar for such a move could be high when policymakers meet later this month to decide on borrowing costs.
Stock futures fell and bond yields surged after the report reinforced traders’ expectations that the Fed will keep interest rates higher for longer to tamp down inflation. The 10-year Treasury yield jumped eight basis points to 5.3%.
Odds for a Fed rate hike in October rose to 49% Wednesday morning, up from 22% one day ago, according to CME FedWatch. Traders widely expect the Fed to raise rates at least once before year-end.
The US dollar index rose 0.5% and hit its highest level since April 2025. Higher interest rates can boost the dollar.
This story is developing and will be updated.
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CNN’s John Towfighi contributed reporting.
