Rising Gas Costs Expected to Drive September Inflation Surge Ahead of Midterms

POLICY WIRE — Washington, USA — American consumers are bracing for a potential uptick in inflation for September, marking one of the final economic reports before the upcoming midterm elections. Economists surveyed by FactSet anticipate a 3.6% year-over-year increase in consumer prices, rising from the 3.4% recorded in August.

On a month-to-month basis, experts forecast a 0.6% rise in prices, the most significant jump since April and an increase from the 0.4% growth seen in the previous month. The Labor Department is scheduled to release these figures on Wednesday morning.

The data is expected to highlight the persistent economic strain caused by the war with Iran, which has disrupted energy supplies and kept inflation elevated. While prices have retreated from a 9.1% peak in 2022, they have trended upward since the conflict began in late February, creating political headwinds for Republicans and complicating the Federal Reserve’s mandate to maintain price stability.

Public sentiment regarding the economy has reached new lows, with an AP-NORC Center for Public Affairs Research poll indicating that only 17% of U.S. adults approve of Donald Trump’s management of the cost of living. approval for his handling of the economy has dipped to 26%.

Core inflation, which strips out volatile food and energy costs, is projected to rise 2.5% annually, a slight increase from 2.4% in August. While this remains near the Fed’s 2% target, it has largely stagnated at this level since January. Monthly core prices are expected to have grown by 0.2%.

Federal Reserve Chairman Kevin Warsh noted last month that inflation remains stubbornly high, prompting the central bank to raise interest rates to approximately 3.9%. “The plain fact is that inflation is too high and has been for too long,” Warsh stated, adding that recent summer reports failed to show meaningful improvement in underlying trends.

While the Fed has a policy meeting scheduled for October 27-28, most investors anticipate that officials will hold rates steady before potentially implementing another hike in December. The central bank is currently balancing the need to curb spending against supply-side shocks, such as the 9% jump in gas prices from August to September, which has also driven up airfares by roughly 23%.

Businesses are increasingly passing these costs to consumers. PepsiCo recently announced price hikes for snacks like Doritos, Ruffles, and Sun Chips to offset fuel and ingredient expenses. Similarly, the cost of technology has risen; Nintendo increased the price of the Switch 2 to $499.99 on September 1, and the iPhone 17 launched at a 10% premium over its predecessor.

Reporting by Policy-Wire (PW)