U.S. consumer prices rose sharply in September, pushing annual inflation to 3.7 percent, up from 3.4 percent in August, according to the Consumer Price Index report released by the Labor Department's Bureau of Labor Statistics on Wednesday.
The increase was higher than expected and came in the final inflation report before the midterm elections on November 3.
On a monthly basis, prices rose 0.6 percent. Petrol prices led the surge, jumping 9.1 percent in September alone and accounting for more than half of the monthly CPI increase. Over the past 12 months, petrol prices are up 34.2 percent.
Overall energy inflation rose 20.4 percent over the year, as prices for fuel oil, energy services, and electricity all climbed. Fuel oil, used in home heating, surged 74.2 percent over the same period.
The average price for a gallon of petrol now stands at $4.33, compared with $4.31 a month ago, according to the American Automobile Association, which tracks daily petrol prices. Diesel prices are higher, at $6.29 per gallon, up from $6.23 a month ago.
Patrick DeHaan, head of petroleum analysis for GasBuddy, wrote on X: "2026 has now seen more days with average gas prices over $4/gal than any year before: 158 days."
Tensions involving Iran, Russia, and Ukraine have weighed on global energy markets. "The directionless war in Iran continues to disrupt global supply chains, driving up the prices of food and fuel," said Kyle Moore, chief economist at The Century Foundation.
Food costs were a relative bright spot. Overall food prices were flat in September, unchanged on the month and up 2.5 percent over the year. Food away from home, including restaurant meals, rose 0.2 percent, but that was offset by a 0.1 percent decline in food-at-home prices.
At the grocery store, poultry prices jumped 0.7 percent, fruit and vegetable prices rose 0.5 percent, and juice prices increased 1.1 percent. Milk prices dropped 2.1 percent and beef prices fell 0.9 percent.
Shelter costs rose 0.4 percent from the previous month, following a 0.3 percent increase in August.
Core inflation, which strips out food and energy prices, stood at 2.6 percent.
Amid heavy investment in artificial intelligence infrastructure, prices for computer software and accessories jumped 28 percent from the same time last year. "The AI boom is playing a huge part, and we have all read about the hundreds of billions being poured into data centers, AI firms, and models," said Rami Cassis, principal of Parabellum Investment.
The inflation data arrives days before the Federal Reserve's next interest rate decision. Last month, the central bank raised rates by 25 basis points, bringing the target range to 3.75–4.00 percent, its first hike in three years.
Economists are divided over whether the Fed will raise rates again or hold them steady. According to CME FedWatch, there is a 52.9 percent probability that rates will remain unchanged, while a 47.1 percent chance of a further quarter-point hike that would bring the range to 4.00–4.25 percent.
Experts said the Fed will be closely watching whether rising energy costs begin to affect other areas of the economy and drive inflation higher.
The report adds political pressure ahead of the midterm elections. A recent poll showed that approximately 78 percent of Americans blamed President Donald Trump's policies for rising prices.
U.S. markets fell following the release of the data. The Nasdaq dropped 0.8 percent and the S&P 500 fell 0.6 percent, while the Dow Jones Industrial Average was roughly flat in midday trading.
