Inflation Climbs to 3.7% in September as Gasoline Jumps 9.1%, Fueling Fed Rate-Hike Bets
The September consumer price index showed prices up 0.6% for the month and 3.7% from a year earlier, with gasoline accounting for more than half of the gain. Bond yields jumped and traders sharply raised the odds of an October Fed rate hike.
Inflation ran hotter than expected in September, as a 9.1% jump in gasoline prices pushed the consumer price index up 0.6% for the month and 3.7% from a year earlier, according to Bureau of Labor Statistics data released Wednesday.
Economists had expected prices to rise 0.6% on the month and 3.6% from a year earlier, CNN reported. The annual rate accelerated from 3.4% in August, moving further from the Federal Reserve’s 2% target.
A closely watched measure of underlying inflation also came in hot. Core CPI, which excludes food and energy, rose 0.3% from August and 2.6% from a year earlier, against expectations of 0.2% and 2.5%. Shelter costs rose 0.4%, the fastest monthly increase in five months. Gas prices accounted for more than half of September’s monthly increase, and inflation has now outpaced wage growth for six straight months.
Markets reprice the Fed’s next move
Investors sold bonds and futures after the report. The 10-year Treasury yield jumped eight basis points to 5.3%, and stock futures turned lower. Odds of a rate hike at the Fed’s meeting later this month rose to 49% Wednesday morning, up from 22% a day earlier, according to CME FedWatch. Traders now widely expect the Fed to raise rates at least once before year-end. The dollar index rose 0.5% to its highest level since April 2025.
Jeff Schulze, head investment strategist at the Franklin Templeton Institute, wrote in a note Wednesday that price pressures spreading beyond gasoline make the case for more rate hikes, while adding that recent comments from Fed officials suggest the bar for an October move is high.
What comes next
Wednesday’s report was the last look at consumer prices before the midterm elections. Fed policymakers meet in two weeks to decide on borrowing costs, with the central bank’s 2% target still distant; core inflation has run above it for more than five years, MarketWatch reported.
Reporting based on coverage by CNN and MarketWatch.
