US inflation rises before midterm elections, fuelling rate hike fears | Inflation News
Economists Split on Potential Fed Rate Hike as Inflation Concerns Rise Ahead of Midterms
WASHINGTON — Consumer prices in the United States rose sharply in September, increasing the likelihood of an interest rate hike by the Federal Reserve later this month. The annual inflation rate reached 3.7 percent, up from 3.4 percent in August, according to the Consumer Price Index (CPI) report released Wednesday by the Labor Department’s Bureau of Labor Statistics (BLS). Monthly prices also saw a significant rise of 0.6 percent.
The surge in prices was largely driven by a 9.1 percent increase in petrol costs, which accounted for more than half of the overall monthly CPI increase. Year-over-year, petrol prices have risen by 34.2 percent, influenced by ongoing tensions between the U.S. and Iran, as well as conflicts involving Russia and Ukraine that are straining global energy supplies.
Kyle Moore, chief economist at The Century Foundation, commented on the situation, stating that the conflict in Iran continues to disrupt supply chains, contributing to higher prices for essential goods like fuel and food.
As of now, the average price for a gallon of petrol stands at $4.33, slightly up from $4.31 last month, according to the American Automobile Association (AAA). Diesel prices have also increased, reaching $6.29 per gallon, up from $6.23 a month earlier.
Research conducted by GasBuddy indicates that 2026 has already seen more days with average gas prices exceeding $4 per gallon than any previous year, totaling 158 days.
In addition to fuel costs, shelter expenses saw a 0.4 percent rise in September, continuing the previous month’s trend of a 0.3 percent increase. Food prices remain stable overall, although prices for dining out increased by 0.2 percent. This uptick was counterbalanced by a 0.1 percent decline in grocery prices. Notably, prices for poultry rose by 0.7 percent, while fruit and vegetable prices increased by 0.5 percent. Conversely, milk prices fell by 2.1 percent, and beef prices decreased by 0.9 percent.
Amid a surge in investments geared towards artificial intelligence infrastructure, prices for computer software and accessories have jumped by 28 percent in the past year. Rami Cassis, principal of Parabellum Investment, emphasized the significant financial influx into AI developments and data centers.
The inflation report arrives just days ahead of the Federal Reserve’s upcoming monetary policy meeting, where a decision on interest rates is expected. The central bank recently raised rates by 25 basis points to a target range of 3.75 to 4.00 percent, marking its first hike in three years.
Current projections reveal a divided perspective among economists regarding the Fed’s next move. According to CME FedWatch, there is a 52.9 percent probability that rates will remain steady, while a 47.1 percent chance indicates a potential quarter-point hike to a range of 4.00 to 4.25 percent.
The inflation data adds pressure on Republican lawmakers ahead of the midterm elections scheduled for November 3. A recent Reuters/Ipsos poll indicates that approximately 78 percent of Americans attribute rising prices to the policies of the current administration.
Following the release of the inflation report, U.S. markets exhibited downward trends, with the Nasdaq Composite falling by 0.8 percent and the S&P 500 decreasing by 0.6 percent, while the Dow Jones Industrial Average showed little change during midday trading.
