WASHINGTON – US consumer prices accelerated in September amid a surge in fuel costs, dealing another blow to President Donald Trump and his Republican Party ahead of the Nov 3 midterm elections and putting an interest rate increase later in October back on the radar.
The Consumer Price Index (CPI) rose 0.6% in September after climbing 0.4% in August, the Labour Department’s Bureau of Labour Statistics said on Oct 14.
In the 12 months till September, the CPI advanced 3.7% after rising 3.4% in the year ended August.
Economists polled by Reuters had forecast the CPI would gain 0.6% over the month and increase 3.6% on a year-on-year basis. Petrol prices soared 7.1% last month, data from the US Energy Information Administration showed.
The report followed surveys this month showing a further deterioration in consumer sentiment and a plunge in Trump’s approval rating, driven by angst over the rising cost of living. A Reuters/Ipsos poll showed about 78% of Americans blamed Trump’s policies, including tariffs on imports and the US-Israeli war with Iran, for rising prices, which are outpacing wages.
Underlying inflation picks up
Excluding the volatile food and energy components, the CPI gained 0.3% in September, matching the gain in August. In the 12 months ended September, core CPI inflation increased 2.6% after advancing 2.4% in the year to August.
The US Federal Reserve tracks the Personal Consumption Expenditures Price Index for its 2% inflation target. The core CPI measure is lagging core PCE inflation, which increased 3% in August, because of the different weights assigned to the components in the baskets.
The central bank last month raised its overnight benchmark interest rate by 25 basis points to the 3.75%-4% range, the first hike in three years, and flagged further increases in borrowing costs in the months ahead. Prior to the CPI report, financial markets assigned a roughly 22% chance of a rate hike at the Oct 27-28 policy meeting, CME Group’s FedWatch Tool showed.
The odds of a rate increase this month diminished following underwhelming payroll gains in September as well as cooler-than-expected PCE inflation readings for July and August. Economists had expected the Fed to raise rates in December.
The September CPI inflation report was keenly awaited by millions of retirees and other Social Security recipients trying to figure out how much their benefits will increase in 2027.
The Social Security Administration uses the CPI for Urban Wage Earners and Clerical Workers data from the third quarter of 2025 to the third quarter of 2026 to determine the annual cost-of-living adjustment (COLA) for Social Security and Supplemental Security Income benefits for 2027.
The programmes benefit older Americans who have retired as well as the disabled and certain widows, widowers and children.
The Senior Citizens League, one of the nation’s biggest seniors groups, projected a 3.5% COLA raise next year. That would be up from 2.8% in 2026, and would lift the average monthly benefit for retirees by US$67.90 to US$2,007. The Social Security Administration will announce the COLA increase for 2027 later on Oct 14. REUTERS
