September CPI Rises to 3.7%, Above the 3.6% Forecast, as Gasoline Jumps 9.1% in a Month

Since this morning's CPI forecasts pointed to a 3.6% reading, the official number has come in hotter. Consumer prices rose 3.7% in the 12 months through September, the Bureau of Labor Statistics said today, Oct. 14. That is up from 3.4% in August, which held for two months, and above the 3.6% economists surveyed by FactSet expected.

On the month, prices rose 0.6%, up from 0.4% in August. It is the last major price report before the midterm elections next month.

Energy still drives the number

Gasoline rose 9.1% in September and accounted for more than half of the monthly increase, according to the Labor Department. Energy prices are up 20.4% from a year ago. Gasoline alone is up 34.2%.

Fuel oil, used to heat homes, is up 74% year over year. Airfares are up 22.4%.

AAA put the national average for a gallon of gas at $4.33 on Wednesday, down slightly from recent weeks but well above the $2.98 it averaged before the war with Iran began. Diesel hit a record in late September and averages $6.29.

Crude was trading at just over $70 a barrel before the conflict. It is now above $100.

Core inflation also came in hot

This was not only a gas story. Core CPI, which strips out food and energy, rose 0.3% on the month and 2.6% from a year earlier. Economists had forecast 0.2% and 2.5%. The annual core rate was 2.4% in August, a five-year low.

Shelter costs rose 0.4% from August, the fastest monthly pace in five months, according to BLS data. Housing inflation has been cooling for more than three years, but economists have questioned how much further it can slow with low inventory and high interest rates.

Inflation has also outpaced wage growth for six months in a row, so paychecks are losing ground.

Wall Street analyst Adam Crisafulli of Vital Knowledge called the report "clearly hot" and said there aren't "many ways to sugarcoat it." He added that energy prices "being so high for so long is starting to seep into the broader economy."

Fed hike odds jump

Markets moved fast. Stock futures fell and bond yields rose after the release. The 10-year Treasury yield climbed eight basis points to 5.3%, and the U.S. dollar index rose 0.5% to its highest level since April 2025.

CME FedWatch put the odds of a rate hike at the Fed's October meeting at 49% this morning, up from 22% a day earlier. Traders widely expect at least one hike before the end of the year.

Fed Chair Kevin Warsh raised rates last month for the first time since 2023, to about 3.9%, in a unanimous vote. "The plain fact is that inflation is too high and has been for too long," he said at the news conference. Fed officials have penciled in one more increase this year.

Some Fed officials have suggested the bank can wait. Jeff Schulze of Franklin Templeton Institute wrote that the broadening of price pressures beyond the pump "bolsters the case for additional rate hikes," but that recent Fed commentary suggests the bar for acting at the October meeting could be high.

Much of the current inflation comes from supply shocks tied to the Iran war's disruption of oil and gas, which rate hikes do little to fix directly. The Fed's tool works by slowing spending and growth.

The political fallout

The timing is awkward for the party in power. An AP-NORC poll found 17% of U.S. adults approve of President Trump's handling of the cost of living and 26% approve of his handling of the economy, a new low for that measure. A Reuters/Ipsos survey found 78% of Americans blame the administration's policies for inflation outpacing their earnings, including 57% of Republicans who support Trump.

Trump has pointed at Iran. On Tuesday he posted that Yemen's Houthis were hitting Saudi Arabia and "purposefully trying to drive up Oil Prices, probably prior to the U.S. Elections." The White House did not immediately respond to a request for comment on today's report.

Tariffs are a second factor in dispute. The Supreme Court struck down most of the additional global levies in February, and Trump immediately imposed a 10% global tariff in their place. Research from the Federal Reserve Bank of New York found the higher import taxes have had an impact on inflation. Trump has argued the tariffs raise revenue, boost manufacturing and encourage buying American goods.

Brown University estimates higher energy prices from the war have cost U.S. households more than $1,020 each, $133 billion across all consumers.

What comes next

The Fed meets Oct. 27-28. Euronews reports most Wall Street investors still expect a hold, with a hike possible in December, while CME FedWatch odds for October have climbed to 49%. The next CPI report, covering October, comes after the elections.