Inflation rose to 3.7 percent in September: BLS

Inflation rose slightly in September after holding steady the month prior, new data from the Bureau of Labor Statistics (BLS) showed Wednesday.

The consumer price index (CPI) increased 0.6 percent last month and was up 3.7 percent relative to September 2025. That marked an increase from August, when annual inflation sat at 3.4 percent.

The popular inflation metric was expected to rise by 0.5 percent in September and increase slightly to 3.6 percent year over year, the Federal Reserve Bank of Cleveland’s “Nowcast” projected on Tuesday.

Gas prices, which rose 9.1 percent in September, accounted for more than half of the monthly increase in inflation, according to the BLS.

Energy prices overall ticked up by 5.2 percent last month after rising by 2.1 percent in August. Food prices, meanwhile, held steady in September and were up 2.5 percent from 12 months prior.

Fuel costs have remained elevated amid the Iran war , with President Trump’s efforts to lower diesel and gas prices not bearing fruit so far.

A gallon of regular gas costs roughly $4.33 as of Wednesday morning, up from $2.98 two days before the U.S. and Israel launched the war, according to data from AAA . Diesel also costs about $6.30 per gallon, an increase of roughly $2.41 relative to a year ago, AAA reported.

Trump has not indicated he will end the war soon, saying Wednesday he has “had it” with the Islamic Republic’s leaders.

“We’re going to do a number [on Iran],” the president said during a campaign rally in Alaska.

Core annual inflation, which does not include more volatile food or energy prices, was 2.6 percent — higher than the Cleveland Fed’s projection of 2.4 percent, which is where it stood in August.

Heather Long, chief economist at Navy Federal Credit Union, noted the spike in inflation “was largely driven by rising gas and diesel prices” along with higher airfares and prices for used cars.

“The big problem = Inflation rose 3.7% in the past year, wiping out 3% average wage gains,” she wrote Wednesday on social platform X.

The data from the BLS comes in two weeks before the Federal Open Market Committee (FOMC) decides whether to raise interest rates again . The FOMC last month hiked rates by a quarter point to bring inflation down towards its 2 percent target.

Since that vote, multiple Fed officials have signaled additional rate hikes — after 16 of 18 FOMC officials predicted at least one more this year in the committee’s quarterly projections .

Beth Hammack, the president of the Cleveland Fed and a member of the FOMC, said Monday that persistent inflation may “require a more restrictive policy,” noting price pressures stem from energy shocks , Trump’s tariffs and the artificial intelligence buildout .

“Because of the breadth of inflationary pressures, my baseline forecast is that it will take some time for inflation to return to 2 percent, even with appropriate monetary policy,” Hammack said at the annual meeting of the National Association of Business Economics.

Fed officials have stressed, though, that they need to evaluate incoming economic data before deciding on future monetary policy.

Philip Jefferson, a vice chair of the Fed, said earlier this month officials will be “carefully examining trends in the data, the evolving outlook and the balance of risks.”

Traders are pricing in a 78.4 percent chance of the central bank holding rates at a range of 3.75 percent to 4 percent later this month, according to the CME FedWatch tool .

“Combined with continued economic resilience, this suggests the Fed’s job is not yet done,” Seema Shah, the chief global strategist at Principal Asset Management, said of the latest inflation data.

“We continue to expect further hikes in December and early 2027 before the Fed can be confident that inflation is on a sustained path back to target,” she added.

One other data point the FOMC received since its last meeting was the latest personal consumption expenditures (PCE) price index, its preferred measure of inflation.

Annual inflation, as measured by the PCE , fell from 3.7 percent in July to 3.4 percent in August . The Bureau of Economic Analysis will release PCE data on Oct. 29, a day after the FOMC decides whether to hike rates again.