Gas Prices Push Inflation to 3.7 Percent in the Last Report Before the Midterms

Consumer prices rose 3.7 percent in September from a year earlier, the Bureau of Labor Statistics reported Wednesday, as a surge in gasoline costs tied to the war with Iran pushed inflation further from the Federal Reserve’s 2 percent target in the last price report before the Nov. 3 elections.

Prices rose 0.6 percent from August. Economists surveyed by Dow Jones had expected an annual rate of 3.6 percent. Gasoline prices jumped 9.1 percent in the month and accounted for more than half of the overall increase. Over the past year, gasoline is up about 34 percent and the broader energy index about 20 percent.

Core inflation, which leaves out volatile food and energy prices and which the Fed watches closely, rose 2.6 percent from a year earlier, with a 0.3 percent gain for the month. Both figures came in slightly above forecasts. Shelter costs rose 0.4 percent in September and are up 3.2 percent over the year.

Some categories offered relief. Food prices were unchanged for the month and are up 2.5 percent from a year ago, and grocery prices, medical care goods and utility gas service were among the few major categories that declined. Airfares rose 1.2 percent from August, their smallest increase since June. But computer and software prices posted record annual increases.

The pressure traces back to fuel. Oil has climbed from about $80 a barrel in August to more than $106, and unleaded gasoline is up roughly 45 percent since late February, when the United States and Israel went to war with Iran. Diesel, which moves freight, farm equipment and ships, is up about 70 percent over the same period, a cost that spreads into the price of nearly everything else.

Paychecks have not kept up. Wage growth was running at about 3 percent a year as of September and has not outpaced inflation since March.

Kevin Hassett, director of the White House National Economic Council, called the report “a disappointing number” in an interview on Fox Business, while arguing that many of President Donald Trump’s policies are helping to hold inflation down and that the energy shock is the main culprit. That is a fair point as far as it goes: excluding food and energy, inflation remains well below where it stands overall.

Before the report, traders had expected the Fed to wait until December for its next rate increase. Afterward, the odds of a hike at the central bank’s Oct. 27-28 meeting rose above 55 percent. A higher benchmark rate would likely raise borrowing costs on credit cards, personal loans and car loans. Stocks fell, with the Nasdaq Composite down 1.8 percent and the S&P 500 off 1.1 percent.

Polls consistently show the cost of living is a top concern for voters in both parties, and early voting begins in many places this week.