US inflation accelerates in September as gasoline prices surge
US consumer prices accelerated in September, driven by a surge in gasoline costs, according to Labor Department data that put an interest rate increase at the Federal Reserve's October meeting back in play.
The Consumer Price Index rose 0.6% last month after climbing 0.4% in August, the Bureau of Labor Statistics said. The increase matched economists' expectations. A 9.1% jump in gasoline prices accounted for more than half of the monthly rise, with energy costs pushed higher by the US-Israeli war with Iran. In the 12 months through September, the CPI advanced 3.7%, up from 3.4% in August.
Core inflation, which excludes volatile food and energy components, rose 0.3% on the month, above the 0.2% forecast in a Reuters poll of economists. Shelter costs rose 0.4%, while used car and truck prices increased 0.7% and airline fares climbed 1.2%. Core CPI was up 2.6% year on year, after a 2.4% annual gain in August.
Financial markets raised the probability of a rate hike at the Fed's October 27-28 meeting to roughly 52% from about 22% before the report, according to CME Group's FedWatch Tool. The Fed raised its benchmark overnight rate by 25 basis points in September to 3.75%-4.00%, its first increase in three years, and signalled further tightening ahead. Jeffrey Roach, chief economist at LPL Financial, said the report complicates the Fed's decision this month and that the last stretch back to target could remain bumpy.
The data landed amid mounting concern over the cost of living. A Reuters/Ipsos poll showed about 78% of Americans blamed President Donald Trump's policies, including import tariffs and the Middle East conflict, for rising prices. The Social Security Administration separately announced a 3.6% cost-of-living adjustment for benefits.
