The Zhitong Finance App learned that consumer prices in the US may rise sharply in September, driven by rising gasoline and food prices. This adds more bad news to US President Trump and the Republican Party ahead of the key midterm elections on November 3. The US Department of Labor will release the Consumer Price Index (CPI) report at 20:30 Beijing time on Wednesday. Economists predict that CPI may rise 0.6% month-on-month in September and 0.4% in August. The CPI for September is expected to rise 3.6% year over year, up from 3.4% in August. The Federal Reserve tracks the personal consumption expenditure (PCE) price index and uses it as a reference indicator for the 2% inflation target.
Earlier surveys showed that at a time when the rising cost of living caused dissatisfaction, consumer confidence deteriorated and Trump's approval rating declined. According to polls, about 78% of Americans blame Trump's policies for rising prices, including import tariffs and the war between the US, Israel, and Iran; price increases are exceeding wages.
However, the September CPI report is expected to show that after excluding highly volatile food and energy prices, other commodity prices will rise moderately, which will further reduce the urgency of the Federal Reserve raising interest rates again this month.
Food and energy prices are rising
Economists, on the other hand, said that the slowdown in core CPI monthly inflation has given little comfort to consumers, especially those at the bottom of the so-called “K-type economy.”
“People care about food and energy. It's something they can feel every day,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University. “Many voters are in the lower half of the K-type economy. They are suffering from rising energy and food prices, and I think this will affect the election results, and many people seem to think the same.”
Some economists estimate that gasoline may contribute about 0.3 percentage points to September's CPI. According to data from the US Energy Information Administration, gasoline prices soared 7.1% in September. Food prices are expected to rise at least 0.2%, after rising 0.1% for two consecutive months.
The September CPI report will be closely watched by millions of retirees and other social security recipients, who are trying to estimate how much benefits will increase next year. The US Social Security Administration used CPI data for urban wage earners and civilian workers from the third quarter of 2025 to the third quarter of 2026 to determine the 2027 annual cost of living adjustment (COLA) for social security and supplementary security income benefits. These programs benefit retired American seniors, as well as people with disabilities, certain widows, widowers, and children. “The Senior Citizens League” (The Senior Citizens League), one of America's largest senior groups, predicts that COLA will increase by 3.5% in 2027, up from 2.8% in 2026, which will increase the average monthly benefit for retirees by $67.90 to $2,007.
The impact of the energy price shock is being closely watched for signs of spreading beyond the transportation industry. Some economists say that more expensive energy products have not been embedded in inflation because the increase in core CPI was moderate. Others warned that diesel prices are at record highs and that the Middle East conflict shows no sign of ending, which will soon spread to supermarket prices. They pointed out that the price indicators in the enterprise survey read too high.
Core inflation is expected to be moderate
Excluding volatile food and energy, the CPI is expected to rise 0.2% month-on-month in September and 0.3% in August. The core CPI inflation rate is expected to slow down in September, which will reflect the gradual decline of the boost brought about by the jump in mobile phone prices due to AT&T service changes, although it is impossible to rule out the possibility that the increase will exceed expectations. Other service providers also raised their fees in September.
Airline ticket prices are likely to rise further due to rising aviation fuel prices. Rents are expected to rise moderately. Commodity prices are likely to rise slightly as the effects of tariffs subside. Core CPI inflation is expected to rise 2.5% in the 12 months ending September, and 2.4% in August. The indicator lags behind core PCE inflation, which rose 3.0% in August due to the different weights of the components in the basket.
Expectations for the Federal Reserve's interest rate hike in October have cooled
The Federal Reserve raised the overnight benchmark interest rate by 25 basis points to the 3.75%-4.00% range last month, the first rate hike in three years, and suggests that borrowing costs will rise further in the next few months. According to CME's FedWatch tool, the financial market believes that the probability of an interest rate hike at the October 27-28 policy meeting is about 22%.
Disappointing growth in non-farm payrolls in September and lower-than-expected PCE inflation in July and August weakened the possibility of interest rate hikes this month. Economists expect the Federal Reserve to raise interest rates in December.
Scott Anderson, chief US economist at BMO Capital Markets, said, “If the core CPI increase in September remains in the 0.2% month-on-month range, then the Federal Reserve should be able to keep interest rates unchanged in October. However, this does not end the debate over whether further rate hikes are needed in the future.”