Higher energy prices drove up inflation in the United States in September, a warning shot to President Trump ahead of midterm elections that have centered primarily on affordability concerns. The uptick in consumer prices will also keep the Federal Reserve under pressure to raise interest rates again after last month’s move.
The Consumer Price Index Report, released by the Bureau of Labor Statistics on Wednesday, showed that overall prices rose 0.6 percent, the largest monthly increase in five months. Compared with the same time last year, prices were 3.7 percent higher.
The bulk of the increase stemmed directly from energy prices, which have shot higher this year because of the war with Iran. That has translated into increased costs for Americans, who are paying more to fill their cars, heat their homes and travel by air.
Gasoline prices, which in late September rose to nearly $4.50 a gallon, surged 9.1 percent for the month. That accounted for more than half of the overall monthly increase in prices. Gas prices are up 34.2 percent over the past year.
Fuel oil prices, used for heating in many homes in the Northeast, have also shot higher, rising 15.3 percent in September, or 74.2 percent on an annual basis. Higher fuel costs have boosted airfares, which were up 1.2 percent in September, or 22.4 percent over the year.
Food prices were flat for the month, but over the past 12 months have risen 2.5 percent.
“Core” inflation, which excludes volatile energy and food prices, edged higher as well, but by a smaller magnitude. Over the course of September, these prices were up only 0.3 percent. Over the past year, they were up 2.6 percent.
Fed officials pay closest attention to the core measure, which they see as the best gauge of underlying inflation. They also track an even more granular metric, known as “supercore” inflation. It measures prices for core services once housing costs are excluded. For a second straight month, it came in hot, rising 0.4 percent in September. Over the past three months, supercore prices have risen at an annual rate of nearly 4.6 percent.
The data comes at a highly sensitive political moment, with the midterm elections just weeks away. Mr. Trump has often sought to dismiss the notion that the affordability crisis has worsened under his watch. At a rally in Alaska late on Tuesday, he proclaimed that prices had improved under his watch.
But September’s data suggests a far bleaker backdrop.
Wage growth has remained relatively muted over the past year. That, combined with higher inflation, means Americans are earning less for an hour of work. Average hourly earnings, adjusted for inflation, fell 0.5 percent in September, and were down 0.7 percent from a year earlier. It was the sixth straight month of year-over-year declines in real earnings.
Average hourly earnings are now back to almost where they were when Mr. Trump was sworn into office for the second time in January 2025, meaning that, on average, Americans have experienced zero wage growth, in real terms, since he returned to the White House.
In an interview with Fox Business on Wednesday, Kevin Hassett, the director of the White House National Economic Council, acknowledged that the rise in inflation was “disappointing” and pointed to the widening conflict in the Middle East, which he said had caused a “negative shock to energy again.”
While the war with Iran — and the energy shock that has followed — is responsible for the bulk of the pickup in inflation, it has not been the only source of price pressures. Over the past year, Mr. Trump’s tariffs have made everyday items, like household appliances, more expensive. The effect has finally started to wane but it still noticeable in some sectors. For example, prices for toys were up 4.2 percent in September, while apparel rose 0.3 percent.
Soaring costs associated with the boom in artificial intelligence investment have also pushed inflation higher. Prices for computers and related equipment have risen 9.7 percent over the past year, while software prices have gained 28.4 percent.
The A.I. buildout is particularly challenging for the Fed because the companies behind the boom appear undeterred by not only higher interest rates, but also soaring costs for the chips, electricity and other items that are crucial to continued growth.
Last month, the Fed voted unanimously to raise rates by a quarter of a percentage point to a new range of 3.75 to 4 percent. It was the central bank’s first major step since July 2023 to contain elevated inflation. Projections released alongside the policy decision showed that 16 of the 18 officials who submitted estimates thought that rates would end the year at 4 to 4.25 percent.
The Fed convenes twice more before the end of the year, with the next meeting scheduled in late October, just days before the midterm elections.
In the weeks before September’s C.P.I. report, top policymakers appeared to have coalesced around a view that the Fed did not need to raise rates at consecutive meetings at this juncture to tame inflation, dimming odds of an October move. Officials are unlikely to abandon that approach in the wake of Wednesday’s release, but the hotter-than-expected pace of inflation will force them to explain why moving gradually is appropriate when price pressures are picking up.
The two-year Treasury yield, which is sensitive to changes in policy expectations, rose sharply by 0.1 percentage point to 4.88 percent in the immediate aftermath of the report. Traders in federal funds futures still expect the next rate increase at the Fed’s final gathering of the year in December, although the odds that the central bank would take action later this month jumped to 43 percent from 24 percent on Tuesday.
The need for further increases will depend on how quickly inflation eases, as policymakers expect in 2027. In an interview with Bloomberg on Tuesday, John C. Williams, who as president of the Federal Reserve Bank of New York is vice-chair of the policy-setting committee, said that while he still saw one more rate increase as appropriate this year, he did not expect further adjustments to be necessary after that.
Ben Casselman contributed reporting.
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