U.S. September CPI Set to Hit 3.6% as Energy Costs Drive Inflation

Key points

• Economists polled by Reuters and Dow Jones expect September headline CPI to rise 0.6% monthly, reaching 3.6% annually.
• Gasoline prices increased 7.1% in September, averaging $4.34 per gallon, while diesel remains above $6 per gallon.
• Core inflation, excluding food and energy, is forecast at 2.5% annually, its highest level since June.
• The Federal Reserve is expected to raise interest rates again in December, with a potential pre-election hike in October if data is hotter than expected.
• 78% of Americans blame current administration policies, including tariffs and the Iran conflict, for rising living costs.

Background

Inflation had previously reached 3.4% in July, with core inflation at 3.4% in August. U.S. Treasury yields hit multiyear highs in late September as oil prices climbed above $92 per barrel. Consumer financial optimism declined in the NY Fed survey, with short-term inflation expectations rising to 3.9%.

How outlets are covering it

OilPrice.com emphasizes the direct impact of gasoline and diesel price spikes on household budgets and political sentiment, noting that 78% of Americans blame current policies for cost-of-living increases. FOREX.com argues that the 0.6% monthly headline inflation is already priced into markets, suggesting that the core CPI reading will be more critical for Federal Reserve policy decisions. NBC News highlights that diesel prices have risen 75% since the start of the Iran conflict, affecting agricultural states and contributing to core inflation through sectors like airfare and electronics, while noting that consumer spending remains resilient despite wage growth lagging inflation.

Why it matters

The September CPI report will determine whether the Federal Reserve accelerates interest rate hikes before the November midterm elections. High energy costs are a top voter concern, potentially impacting Republican majorities in the House and Senate. Persistent inflation above the 2% target complicates monetary policy, risking a stagflationary environment where high prices coexist with a weakening labor market.

What to watch

The official September CPI data will be released on October 14. The Federal Reserve is expected to raise rates in December, with a possible pre-election hike on October 27-28 if inflation proves hotter than expected. Market participants will watch core CPI and 'supercore' readings to assess if energy shocks are spreading into broader price pressures.