US consumer prices are expected to have increased in September, driven by higher gasoline and food costs, adding to concerns about household purchasing power ahead of the November 3 midterm elections. The upcoming Consumer Price Index (CPI) report is also likely to influence the Federal Reserve’s decision on whether to raise interest rates again this month.
Economists surveyed by Reuters expect the CPI to have risen 0.6% in September, compared with a 0.4% increase in August. Annual inflation is forecast to reach 3.6%, up from 3.4% in the previous month.
The anticipated rise comes amid weakening consumer sentiment and declining approval ratings for President Donald Trump. A Reuters/Ipsos poll reported that around 78% of Americans blamed Trump’s policies, including import tariffs and the US-Israeli war with Iran, for rising prices.
Food and Energy Costs Drive Inflation Concerns
Gasoline prices increased 7.1% in September, according to data from the US Energy Information Administration. Economists estimate that the increase could contribute approximately 0.3 percentage points to monthly CPI inflation.
Food prices are also expected to have risen by at least 0.2%, following two consecutive monthly increases of 0.1%.
These costs are particularly significant for households that spend a larger share of their income on essential goods and services. While inflation excluding food and energy is expected to moderate, consumers continue to face pressure from expenses they encounter regularly.
Sung Won Sohn, a finance and economics professor at Loyola Marymount University, said consumers pay close attention to food and energy prices because they affect everyday spending. He also noted that lower-income households are particularly exposed to these increases.
The divergence in economic conditions between higher-income households and those facing greater financial pressure is often described as a K-shaped economy. In this situation, different sections of the population experience different economic outcomes, with some benefiting from stronger financial conditions while others struggle with rising living costs.
Core Inflation May Show a More Moderate Increase
Core CPI, which excludes food and energy prices because of their volatility, is forecast to have increased 0.2% in September, compared with 0.3% in August. Annual core inflation is expected to reach 2.5%, up from 2.4%.
The projected monthly moderation may partly reflect the fading impact of a previous increase in mobile phone prices linked to service changes at AT&T. However, higher fees from other service providers could continue to influence the figures.
Airline fares are also expected to have risen as jet fuel prices increased, while rents may have recorded moderate gains. Goods prices are forecast to have risen marginally as the effects of import tariffs continue to work through the economy.
Despite the expected moderation in core inflation, economists warn that higher energy costs could gradually affect other sectors. Rising diesel prices may increase transportation and distribution expenses, potentially pushing up supermarket prices and other consumer costs.
The extent of this pass-through remains uncertain, but businesses could face further pressure if energy prices remain elevated.
Federal Reserve Faces a Difficult Policy Decision
The Federal Reserve raised its benchmark interest rate by 25 basis points in September, bringing the target range to 3.75%–4.00%. It was the first rate increase in three years, and policymakers indicated that additional increases could follow.
However, weaker-than-expected employment growth in September and cooler inflation readings from July and August have reduced expectations of another increase in October.
Financial markets had assigned an approximately 22% probability of a rate hike at the Federal Reserve’s October 27–28 meeting, according to the CME FedWatch Tool cited in the report.
Scott Anderson, chief US economist at BMO Capital Markets, said a monthly core CPI increase around 0.2% could support the Federal Reserve holding rates steady in October. He added that the figure would not resolve the debate over whether further increases would be necessary later.
Economists expect the central bank could raise rates again in December. The September inflation report will therefore be closely watched for signs of whether price pressures are broadening beyond food and energy.
Social Security Benefits Also in Focus
The inflation report is important for millions of retirees and other recipients of Social Security benefits because consumer price data helps determine annual cost-of-living adjustments.
The Social Security Administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers to calculate adjustments for Social Security and Supplemental Security Income benefits. The calculation compares data from the third quarter of the previous year with the third quarter of the current year.
The Senior Citizens League has projected a 3.5% cost-of-living adjustment for 2027, compared with 2.8% in 2026. Under that estimate, the average monthly retirement benefit would increase by $67.90 to $2,007.
The final adjustment will depend on the official calculation rather than the projection.
With household budgets under pressure, the September CPI report is expected to shape discussions around inflation, interest rates and the cost of living. The figures could also influence economic sentiment in the weeks before the US midterm elections, although their political impact will depend on how voters assess the broader economic situation.
