US consumer prices accelerated in September as the cost of gasoline surged, dealing another blow to President Donald Trump and his Republican Party ahead of the November 3 midterm elections and putting an interest rate increase later this month back on the radar.
The Consumer Price Index report from the Labour Department yesterday showed a broadening of price pressures beyond energy, raising concerns among economists that underlying inflation could be getting sticky. Financial markets now see the Federal Reserve’s interest rate decision this month as a closer call than before the data was released.
The report added to surveys this month that showed a further deterioration in consumer sentiment and a plunge in Trump’s approval rating, driven by angst over the rising cost of living. A Reuters/Ipsos poll showed about 78 per cent of Americans blamed Trump’s policies, including tariffs on imports and the Middle East conflict, for rising prices, which are outpacing wages.
“The last mile back to target could remain bumpy and keep interest rates elevated,” said Jeffrey Roach, chief economist at LPL Financial. “The report complicates the Fed’s decision this month, as the road back to price stability is looking increasingly difficult to navigate.”
The CPI rose 0.6pc last month after climbing 0.4pc in August, the Labor Department’s Bureau of Labor Statistics said. The increase in the CPI was in line with economists’ expectations.
A 9.1pc surge in gasoline prices accounted for more than half of the increase in the CPI over the month. The US-Israeli war with Iran is driving up energy prices. Diesel prices have vaulted to record highs and there are fears that those costs will soon feed through to higher prices at the supermarket.
Food prices were unchanged after gaining 0.1pc in both July and August. Grocery store prices dipped 0.1pc over the month, but rose 1.8pc on a year-over-year basis. Beef prices dropped 1.0pc in September and the cost of dairy and related products eased 0.9pc. But prices for nonalcoholic beverages surged 0.9pc, while fruits and vegetables cost 0.5pc more.
In the 12 months through September, the CPI advanced 3.7pc after rising 3.4pc in August.
Excluding the volatile food and energy components, the CPI gained 0.3pc in September, matching the gain in August. Economists polled by Reuters had forecast the so-called core CPI would rise 0.2pc. The core CPI was lifted by a 0.4pc increase in the cost of shelter, including hotel and motel rooms. Owners’ equivalent rent rose 0.3pc.
There were increases in the costs of recreation and education. Prices for used cars and trucks increased 0.7pc, while airline fares rose 1.2pc amid higher jet fuel prices. Apparel prices climbed 0.3pc.
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