Inflation surged in September as U.S. energy costs jumped

Key points

• US inflation rose to 3.7% annually in September as energy costs jumped.
• Core CPI accelerated to 2.6%, above economists' forecasts.
• The data may push the Fed to raise interest rates this month.

Inflation in the United States accelerated in September, with the Consumer Price Index rising at an annual rate of 3.7%, according to new government data. The increase came as energy costs jumped, and it occurred just weeks before the midterm elections.

Economists had expected an annual rate of 3.6%, according to FactSet. Inflation had held steady at 3.4% for the previous two months.

What drove the increase

The Labor Department said gasoline prices rose 9.1% in September from the prior month and accounted for more than half the monthly increase in the CPI. Energy prices were up 20.4% from a year earlier, while gasoline jumped 34.2%.

Core CPI, which excludes energy and gas, rose 2.6% from a year ago, up from 2.4% in August and above the 2.5% forecast. Airline fares climbed 22.4% from a year earlier, and shelter and used car costs also pushed core inflation higher.

The CPI was clearly hot, and there aren't many ways to sugarcoat it

— Adam Crisafulli, head of Vital Knowledge

What it means for the Fed

Economists said the September figures could pressure the Federal Reserve to raise its benchmark interest rate later this month, as inflation remains above the central bank's 2% target. In September, the Fed raised rates for the first time since 2023, to between 3.75% and 4%, and signaled more increases later this year.

The Fed has two more policy meetings this year, on Oct. 27-28 and Dec. 8-9. Stephen Brown of Capital Economics said the data could prompt the Fed to act this month, with markets now pricing a 50% chance of a hike, up from 20% before the report.