US inflation is running a bit too hot in the middle of autumn
Summary
- US consumer prices increased by 0.6% month-on-month in September, with gasoline prices rising by 9.1%, contributing significantly to the overall inflation rate of 3.7% year-on-year.
- Core inflation, excluding food and energy, rose by 0.3% from August, surpassing consensus estimates, and reached 2.6% year-on-year, driven by higher costs in housing, airline tickets, and services.
- The Federal Reserve, which recently raised its policy rate to 3.75–4.00%, faces increased pressure to consider another rate hike in October, with market probability rising to ~37% following the latest inflation data.
- Inflation is primarily driven by supply shocks, but the spread to services is concerning, making a December rate hike likely, with an October hike also possible.
This content is generated by AI. You can give feedback on it in the Inderes forum.
Automatic translation: Originally published in Finnish 15/10/2026, 04:35 GMT. Give feedback here.
US consumer prices rose in September by 0.6% month-on-month, driven by gasoline, and the year-on-year pace accelerated to 3.7%. Price pressures have begun to spread beyond energy prices, making the Fed's October rate decision a tighter call than before.
The price of gasoline rose by 9.1% month-on-month, accounting for more than half of the increase in consumer prices. Meanwhile, diesel prices increased by 11.9% month-on-month and by as much as 60.9% year-on-year. Food prices remained unchanged, but individual fruits, such as bananas, have begun to show signs of price increases. This may be a sign that transportation costs are being passed on to consumer prices.
Core inflation, excluding food and energy, accelerated to 0.3% from August, while consensus estimates expected a 0.2% increase. Year-on-year, core inflation accelerated to 2.6%. Housing, airline tickets, and services became more expensive, and the impact of tariffs continues to be visible in the prices of items such as clothing and toys. The AI boom is also visible in inflation, as the prices of computers and peripherals rose by 1.3%.
The inflation figures will certainly raise eyebrows also at the Federal Reserve, which in September raised its policy rate to 3.75–4.00%. This was its first hike in three years. Following Wednesday's inflation figures, the market is pricing in a ~37% probability of a rate hike at the October meeting, compared with 22% prior to the figures. Based on the inflation figure, Reuters estimates that core PCE inflation monitored by the Fed will accelerate to 3.1%, which would also be a strongly wrong direction.
Inflation is now accelerating primarily due to supply shocks, but the spread of price pressures to services is a worrying phenomenon. The central bank can hardly look past the rise in energy prices when inflation has been above target for more than five years. Therefore, a December hike is likely, but a hike in October is also possible.
