US inflation rose to 3.7% in the year to September, exceeding forecasts and marking the final major economic data release before midterm elections next month. The increase from 3.4% in August was driven primarily by higher gasoline prices, which jumped 34.2% over the 12-month period and accounted for more than half of September's monthly inflation increase.
The Bureau of Labor Statistics attributed the surge in fuel costs to disruption in Middle East energy supplies stemming from the US-Israel conflict with Iran. Crude oil prices rose from just over $70 a barrel before the conflict to over $100 per barrel. Energy inflation broadly climbed 20.4% year-over-year, with fuel oil for home heating up 74.2%.
Core inflation, which excludes food and energy, remained subdued at 2.6%. Food inflation stayed flat in September and stood at 2.5% annually. Federal Reserve officials are monitoring whether energy costs will spread to other areas of the economy and push inflation higher overall.
Separately, the Social Security Administration announced it will raise benefits by 3.6% starting January 2027. The cost-of-living adjustment will affect about 72 million people receiving retirement, survivor and disability benefits, with an average monthly increase of $75.
The inflation data comes as cost-of-living pressures dominate midterm election discussions across the country. While current inflation remains above the Federal Reserve's 2% target, it has declined significantly from a peak near 9% during the pandemic and 2022 Ukraine invasion.
Research from the Federal Reserve Bank of New York found that President Trump's tariffs have also contributed to inflation. A 10% global tariff introduced this year resulted in US-based businesses absorbing nearly 90% of the added cost, as overseas exporters reduced prices minimally. The Fed found that every percentage point increase in average tariffs led to approximately 0.25% price increases for consumer goods after one year.