Energy Prices Push Inflation to 3.7% in September

Inflation accelerated in September, driven largely by soaring energy prices associated with the war in Iran. According to the Bureau of Labor Statistics, the Consumer Price Index rose 0.6% during the month, bringing annual inflation to 3.7%, up from August.

Gas prices are 34.2% higher than last year

Gasoline prices jumped 9.1% in September and were 34.2% higher than a year earlier. Gasoline alone accounted for more than half of the month’s overall inflation increase. Fuel oil prices rose 15.3% for the month and 74.2% over the year.

Other costs also climbing

Other costs are also climbing. Airfares increased 22.4% over the past year, while computer equipment and software prices rose 9.7% and 28.4%, respectively. Tariffs and growing demand associated with artificial intelligence investment have contributed to price pressures in some sectors.

Wages fail to keep up

Meanwhile, wages are failing to keep pace. Inflation-adjusted hourly earnings were down 0.7% from a year earlier, marking six consecutive months of annual declines. Average real hourly earnings have shown essentially no growth since President Trump returned to office.

The Fed is pressured to raise interest rates

The report also presents a challenge for the Federal Reserve, which raised interest rates in September and may increase them again before year’s end. Higher borrowing costs would add to the financial pressures facing households and businesses.

Affordability

With the midterm elections approaching, affordability has become a central political issue. Democrats blame Trump’s tariffs and the Iran war for rising prices, while the president has continued to point to inflation inherited from the Biden administration.

The bottom line

For American households, the bottom line is straightforward: Prices are rising faster than wages, leaving consumers with less purchasing power even as the cost of borrowing remains high.