US inflation rises to 3.7% in September amid energy price increases

US inflation rose to an annual rate of 3.7% in September, according to data from the Bureau of Labor Statistics. This marks an increase from 3.4% in August and represents the highest inflation rate recorded before a midterm election since 1990, excluding the pandemic period.

Energy Prices Drive Increase

The rise in consumer prices was primarily driven by energy costs. Gasoline accounted for over half of the overall price increases, rising 34% compared to the previous year. Fuel oil, used for home heating, increased by 74% from last year, while air travel costs rose by 22.4%. Overall, consumer prices increased by 0.6% from August to September.

Core inflation, which excludes volatile food and energy prices, ticked up by 0.3% in September to an annual rate of 2.6%. According to the Guardian, price increases this year have been largely driven by the US-Israel war with Iran, which has caused energy prices to soar. Average gas prices remain more than a dollar per gallon higher than last year, according to data from AAA, and diesel prices reached a record high last month.

Political Implications

The inflation report comes amid widespread dissatisfaction with the Trump administration over the cost of living. A recent survey from Reuters/Ipsos found that 78% of Americans blame the current Trump administration’s policies for inflation that is outpacing their earnings, including 57% of Republicans who support Donald Trump.

President Trump has attempted to downplay his administration’s role in price increases, attributing the squeeze to the Iranian government. On Tuesday, Trump posted on social media that Yemen’s Houthi group was attacking Saudi Arabia in a deliberate effort to affect the upcoming elections. “They’ve emerged again, probably at the behest of Iran … in a very nasty way, hitting Saudi Arabia, and purposefully trying to drive up Oil Prices, probably prior to the U.S. Elections — NOT NICE,” he wrote.

During a rally in Wasilla, Alaska, Trump defended his economic record, stating that his support for families has been “substantial.” “Every time they want to try and get me, they say ‘affordability’,” he said.

Federal Reserve Response

The heightened inflation places pressure on the Federal Reserve to increase interest rates to cool prices. Last month, the Fed raised interest rates for the first time since 2023, citing elevated prices. Higher rates affect the cost of borrowing money, including mortgage rates. The 30-year mortgage rate is up to 7.40%.

Richard Carter, head of fixed interest research at Quilter Cheviot, noted in a statement that inflation in the US has come in higher than expected. “The president has been desperate to show he is getting inflation under control and providing the environment for rate cuts, even going so far as allowing Russian diesel back into the market, but those moves are proving too little too late as the war in the Middle East continues to have a grip on the global economy,” Carter said.

Why it matters

The September inflation data is the final report before voters go to polls for the midterm elections. With energy costs significantly impacting household budgets, the economic situation remains a top issue for American voters. The Federal Reserve’s subsequent policy decisions on interest rates will likely influence borrowing costs and economic activity in the coming months.

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Sources

• ft.com: Subscribe to read
• theguardian.com: US inflation rose to 3.7% in September in blow to Republicans before midterms | Inflation | The Guardian

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.