Key inflation gauge heats up thanks to high gas prices day after Fed hits pause on rate hikes

An inflation gauge closely monitored by the Federal Reserve accelerated last month, showing that prices remain elevated less than a week before midterm elections in which the uncomfortably high cost of living for millions of Americans has become a central issue.Consumer prices rose 3.6% in September from a year earlier, the Commerce Department said Thursday, up from 3.4% in August.On a monthly basis, prices climbed 0.5%, up from 0.3% in August and the highest figure since May.Rising gas prices drove much of the inflation increase as renewed violence in the Middle East has kept oil prices above $100 a barrel, up from below $70 before the Iran war.

But prices also rose outside of fuel costs.The cost of services such as shipping, hotel rooms, and utilities increased rapidly from August to September, a sign that inflation is spreading and growing more entrenched.“The inflation outlook has become more concerning,” Ksenia Bushmeneva, an economist at TD, a bank, wrote in a commentary on the report.“Price pressures are showing signs of heating up.

Elevated gasoline prices are keeping headline inflation hot, but underlying pressures are also broadening.”Polls show that the rise in inflation has soured most voters on the economy, leading them to give President Trump poor marks on handling rising prices.Trump campaigned in 2024 on lowering the cost of living, including bringing the cost of gas below $2 a gallon.

It currently averages about $4.25 a gallon nationwide.Excluding the volatile energy and food categories, core inflation also picked up last month.It increased 3.1% from a year ago in September, up from 3% in August, the Commerce Department said.

And from August to September, core prices rose 0.3%, the same as the previous month.Separately, the government also said the economy grew at a strong 3.4% annual rate in the July-September quarter, much faster than the 2.2% growth in the April-June quarter, as consumer spending jumped and business investment rose, f...