U.S. Inflation Rises Ahead of Midterm Elections, Intensifying Fears of Rate Hikes
Economists are divided over a possible Federal Reserve rate hike, as inflation has added uncertainty ahead of the U.S. midterm elections and kept markets on edge.
US consumer prices rose in September in the final inflation report ahead of midterm elections, raising the possibility of a rate hike later this month.
Annual inflation rose to 3.7% from 3.4% in August. According to the Consumer Price Index report released by the Labor Department's Bureau of Labor Statistics (BLS) on Wednesday, prices rose 0.6 percent on a monthly basis.
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The end of the gasoline price list led to increased tensions between the United States and Iran, as well as Russia and Ukraine, over global energy prices. Gasoline prices rose 9.1 percent in September, accounting for more than half of the monthly increase in the CPI, according to the BLS. They had a 34.2% increase compared to the same period last year.
"The undirected war in Iran continues to disrupt global supply chains and drive up food and fuel prices," Kyle Moore, senior economist at the Qaran Foundation, an economic think tank, said in a statement obtained by Al Jazeera.
Gasoline prices have continued to rise. The average price of a gallon of gasoline is $4.33 ($1.14 per liter), compared to $4.31 last month, according to the American Automobile Association (AAA), which tracks gasoline prices daily. Diesel prices are higher, at $6.29 per gallon (1.66 per liter), compared to $6.23 the previous month.
In a post on X, Patrick DeHaan, head of oil analysis for GasBuddy, said: "There have already been more days in 2026 with average gas prices above $4 a gallon than in any previous year: 158 days."
Housing costs also increased by 0.4% compared to the previous month after increasing by 0.3% in August. Food costs were a bright spot in the report, which remained broadly unchanged.
Eating out, including restaurant meals, rose 0.2 percent, but that increase was offset by a 0.1 percent drop in food prices at home, which tracks food costs.
In the grocery store, the price of chicken increased by 0.7%, fruit and vegetable by 0.5%, and the price of fruit juice by 1.1%. However, milk prices fell by 2.1 percent and beef prices by 0.9 percent.
Amid heavy investments in artificial intelligence infrastructure, the price of computer software and peripherals has increased by 28 percent compared to the same time last year.
The AI boom is playing a big role and we all read about the hundreds of billions of dollars invested in data centers, AI companies and models, Parabellum investment manager Rami Cassis said in a statement to Al Jazeera.
The inflation data comes days ahead of the US Federal Reserve's interest rate decision later this month. Last month, the US central bank raised interest rates by 25 basis points, bringing the target range to 3.75-4.00 percent, the first increase in three years.
Economists are divided on whether the Fed will raise interest rates again or hold them steady. According to the CME FedWatch report, which tracks the likelihood of monetary policy decisions, there is a 52.9 percent chance that rates will remain in the 3.75-4.00 percent range, while there is a 47.1 percent chance of a quarter-percentage point hike that would take them to 4.00-4.25 percent.
US markets were down after the inflation report. The Nasdaq fell 0.8 percent and the S&P 500 fell 0.6 percent, while the Dow Jones industrial average was roughly flat in midday trading.