US inflation rose to an annual rate of 3.7% in September, up from 3.4% in August, according to the Bureau of Labor Statistics. This final inflation report before the pivotal midterm elections comes amid polls showing widespread dissatisfaction with the Trump administration over the cost of living.
Price increases are the highest they have been since the annual inflation rate reached a three-year peak of 4.2% in May. Gasoline accounted for over half of overall price increases, up 34% from last year. Fuel oil, which is used to heat homes, increased by 74% from last year, a worrying sign for households heading into the winter. Air travel, which many Americans rely on during the holidays, also increased by 22.4%.
Energy prices drive September surge
Overall, consumer prices went up 0.6% from August. Core inflation, which strips out volatile energy and food prices, also ticked up by 0.3% in September to 2.6% annually.
Price increases this year have largely been driven by the US-Israel war with Iran, which has caused energy prices to soar. Average gas prices remain over a dollar per gallon more than last year, according to data from AAA. Meanwhile diesel, which powers domestic supply chains, reached a record-high last month.
Impact on voters and the White House
September’s inflation rate is the highest it has been before a midterm election, with the exception of the pandemic, since 1990. The economy has consistently been cited as a top issue for American voters, as rising gasoline prices and persistent inflation have eaten into household budgets. Higher energy prices from the Iran war have cost Americans over $1,020 per household, according to Brown University, and a total of $133bn for all US consumers.
Much of the anger is expected to be directed at Republicans, who control Congress and the White House. According to a recent survey from Reuters/Ipsos, 78% of Americans blame the current Trump administration’s policies for inflation that is outpacing their earnings, including 57% of Republicans who support Donald Trump.
In recent weeks, Trump has attempted to downplay his administration’s role in price increases, pointing to the Iranian government as the cause of the squeeze. The White House did not immediately respond to a request for comment on the latest inflation report. On Tuesday, Trump posted on social media that Yemen’s Houthi group was attacking Saudi Arabia in a deliberate effort to affect the upcoming elections.
“They’ve emerged again, probably at the behest of Iran…in a very nasty way, hitting Saudi Arabia, and purposefully trying to drive up Oil Prices, probably prior to the U.S. Elections — NOT NICE,” he wrote.
Federal Reserve and market reaction
Heightened inflation will put more pressure on the Federal Reserve to increase interest rates, its tool to cool prices. Last month, the Fed raised interest rates for the first time since 2023, citing elevated prices. Higher rates affect the cost of borrowing money, including mortgage rates. The 30-year mortgage rate, applied to the most commonly used loans for home ownership, is up to 7.40%.
“Inflation in the US has come in higher than expected, in a blow to Donald Trump ahead of November’s midterms,” said Richard Carter, head of fixed interest research at Quilter Cheviot, in a statement. “The President has been desperate to show he is getting inflation under control and providing the environment for rate cuts, even going so far as allowing Russian diesel back into the market, but those moves are proving too little too late as the war in the Middle East continues to have a grip on the global economy.”
