Inflation accelerated to 3.7% on an annual basis last month as energy prices surged, according to the latest Consumer Price Index data.
The September reading came in hotter than expected, climbing from 3.4% in August and topping economists’ forecast of 3.6%. On a monthly basis, prices rose 0.6% in September, up from 0.4% the month before.
Gas prices were a major force behind the increase, jumping 9.1% from the prior month. According to AAA data, the average price at the pump hit a record $4.33 last month, nearly 50 cents higher than the previous monthly record set in 2023.
Fuel oil was another source of pain for consumers. The product, which millions of Americans rely on to heat their homes, primarily in the Northeast, soared 15.3% from August just ahead of the cold-weather months.
So-called “core” inflation, which excludes volatile food and energy prices and is watched more closely by Federal Reserve officials, also came in hotter than expected. Core prices rose 2.6% annually, up from 2.4% in August.
On a monthly basis, core inflation held steady at August’s hotter-than-anticipated 0.3%, still above the 0.2% economists had expected.
“Some CPI reports seem backward looking and stale, while others seem like they’re foreshadowing what’s to come. This one definitely feels like the latter,” Jake Krimmel, senior economist at Realtor.com, said in a statement.
Krimmel described the rise in core inflation as “worrying.”
Travel and leisure costs were a major contributor on the core side. Car rental prices climbed 5.4% from the previous month, while hotel costs rose 2.3%.
Sports fans are feeling the squeeze as well. The average price of a ticket to a sporting event, including football and soccer games, jumped 7.6%.
The hotter-than-expected numbers raise the likelihood that the Federal Reserve will raise its benchmark interest rate later this month instead of holding off until December.
“This makes the October meeting live,” Stephanie Roth, chief economist at Wolfe Research, told Yahoo Finance.
Traders now see close to even odds of a rate hike, up from less than 25% before the latest data was released.
Not every analyst is convinced the report seals the deal for an immediate hike. Seema Shah, chief global strategist at Principal Asset Management, said in a statement that the numbers may not be hot enough to justify a rate increase this month, but that inflation is clearly still a problem.
“The data reinforces the view that inflation remains too persistent for the Fed to declare victory,” Shah said.
“More than half the CPI basket is still running at an annualized pace above 3%, highlighting the breadth of price pressures across the economy,” she added.
The latest figures paint a picture of mounting price pressures across the economy, from the gas pump and home heating to rental cars, hotels and game-day tickets.
With both headline and core inflation running above expectations, all eyes now turn to the Federal Reserve and whether policymakers will act sooner rather than later to rein in rising prices.
