US inflation accelerates to 3.7% in September as gasoline prices jump 9.1%

US consumer prices rose 0.6% in September, pushing the annual inflation rate to 3.7% from 3.4% in August, the Bureau of Labor Statistics reported on Wednesday. Core prices, which exclude food and energy, increased 0.3% for the month and 2.6% over the year, both slightly above most forecasts.

Gasoline prices surged 9.1% in September and accounted for more than half of the overall monthly gain. The broader energy index climbed 5.2%, with fuel oil up 15.3%. Over the past 12 months, energy prices have risen 20.4% and gasoline 34.2%. These increases reflect the ongoing disruption of energy markets linked to the conflict involving Iran and the Strait of Hormuz.

Shelter costs, the largest component of the index, rose 0.4% in September, the fastest pace in five months. Owners' equivalent rent and rent of primary residence both accelerated. Airline fares jumped 22.4% over the year. Food prices were essentially flat for the month, rising 2.5% annually, with food away from home up 3.5%.

The September reading is the last major inflation snapshot before the US midterm elections. Markets reacted with higher bond yields and lower equity prices, particularly in technology shares. The data reinforce the view that price pressures have not fully subsided and that the Federal Reserve will face continued scrutiny over the pace of any further policy adjustments.

Economists noted that while the energy shock is the dominant driver, underlying services inflation, including shelter and medical care, has remained sticky. The three-month annualised rate for core prices has moved higher, suggesting that the disinflation trend of earlier months has stalled for now.

The Bureau of Labor Statistics collects prices from thousands of housing units and retail outlets across 87 urban areas each month. The September report covers the period before any potential further escalation in Middle East shipping disruptions. Subsequent months will show whether the recent jump in fuel costs continues to feed into broader categories such as transportation services and airfares.

Households are already seeing the effect at the pump and in higher costs for certain services. The 3.7% headline rate is the highest since the spring and returns inflation to a level that has historically influenced voter sentiment on economic conditions.