Rising gasoline and food prices are expected to drive a sharp increase in US consumer inflation in September, intensifying the cost-of-living crisis confronting American households and adding to the political challenges facing President Donald Trump and his Republican Party ahead of the crucial November 3 midterm elections.
The anticipated increase, outlined in economists’ forecasts ahead of the Labor Department’s Consumer Price Index (CPI) report scheduled for Wednesday, comes amid growing public dissatisfaction over household expenses, weakening consumer sentiment and a decline in Trump’s approval rating.
A Reuters survey of economists projected that the CPI, which measures changes in the prices consumers pay for goods and services, would rise by 0.6 per cent in September, compared with a 0.4 per cent increase in August. On an annual basis, inflation is expected to climb to 3.6 per cent from 3.4 per cent in the preceding month.
The projected increase has heightened concerns about the financial pressures facing households, particularly lower-income Americans, whose budgets are more vulnerable to fluctuations in essential expenses such as food, transportation and energy.
A Reuters/Ipsos poll found that approximately 78 per cent of Americans blamed Trump’s policies, including tariffs on imports and the US-Israeli war with Iran, for rising prices that have outpaced wage growth. The findings underscore the political risks associated with persistent inflation as voters prepare to elect members of Congress in November.
Despite the expected increase in headline inflation, economists anticipate a more moderate rise in core CPI, which excludes volatile food and energy prices. The measure is projected to increase by 0.2 per cent in September, down from 0.3 per cent in August, potentially giving the Federal Reserve some justification to refrain from raising interest rates at its October meeting.
However, economists cautioned that a slowdown in underlying inflation would offer limited relief to consumers still struggling with rising everyday expenses.
“People care about food and energy. That's what they feel every day,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University.
“Many voters are at the lower leg of the K-shaped economy. They are suffering because of higher energy and food prices, and I assume that will have an impact on the election results, as a lot of people seem to think.”
The so-called K-shaped economy describes a situation in which different groups experience sharply contrasting economic outcomes, with some households and businesses prospering while others struggle with declining purchasing power and rising living costs.
Fuel and Food Costs Drive Inflation Concerns
Energy prices are expected to be a major contributor to September’s inflation increase. Data from the US Energy Information Administration showed that gasoline prices surged by 7.1 per cent during the month, with some economists estimating that the increase could add approximately 0.3 percentage points to the overall CPI.
Food prices are also expected to have risen by at least 0.2 per cent, following consecutive monthly increases of 0.1 per cent in July and August.
The combination of higher fuel and food costs is particularly troubling because these expenses account for a significant share of household spending and are difficult for many consumers to avoid.
Economists are also monitoring whether rising energy costs will spread beyond transportation and become more firmly embedded across the wider economy. While the anticipated moderation in core inflation suggests that the effects have so far been relatively contained, some analysts warned that persistently expensive energy could eventually push up prices across several sectors.
Record-high diesel prices have raised particular concerns about the cost of transporting goods from farms and factories to retailers. If these expenses continue to rise, supermarkets and other businesses could pass the additional costs on to consumers, further increasing pressure on household budgets.
Some economists, however, said the latest data did not yet show clear evidence of a widespread energy-driven acceleration in underlying inflation. They nevertheless pointed to elevated price indicators in business surveys as a warning that the pressure could intensify.
Core Inflation Offers Limited Relief
Excluding food and energy, core CPI is forecast to have increased by 0.2 per cent in September, compared with 0.3 per cent in August. On an annual basis, core inflation is expected to rise to 2.5 per cent from 2.4 per cent.
The anticipated moderation partly reflects the fading impact of a previous increase in mobile phone prices associated with service changes at AT&T. Nevertheless, economists said a larger-than-expected increase remained possible, particularly as other service providers raised their fees during September.
Airline fares are also expected to have increased further, reflecting higher jet fuel costs, while rents are projected to record moderate gains. Goods prices, meanwhile, are expected to have risen marginally as the effects of tariffs continue to work their way through the economy.
The core CPI measure is also running below the Federal Reserve’s preferred core Personal Consumption Expenditures (PCE) inflation measure, which rose by 3.0 per cent in August. The difference reflects the distinct weights assigned to various goods and services in the two indexes.
Although the US central bank monitors the PCE price indexes in pursuit of its two per cent inflation target, the CPI remains an important indicator of the prices households encounter in their daily lives.
Federal Reserve Faces Difficult Interest Rate Decision
The inflation outlook is likely to complicate the Federal Reserve’s efforts to contain price pressures without placing excessive strain on economic activity.
Last month, the central bank raised its benchmark overnight interest rate by 25 basis points to a range of 3.75 per cent to 4.00 per cent, marking its first increase in three years. It also signalled that further increases in borrowing costs could follow in the months ahead.
However, financial markets have become less convinced that another rate increase will come immediately. According to CME’s FedWatch Tool, investors had assigned approximately a 22 per cent probability to a rate hike at the Federal Open Market Committee’s October 27–28 meeting.
The reduced expectations partly reflect weaker-than-anticipated employment gains in September and cooler-than-expected PCE inflation readings for July and August. Economists nevertheless expect the Fed to raise rates again in December.
A lower monthly core CPI reading could strengthen the argument for leaving interest rates unchanged in October, although a fresh acceleration in inflation would complicate that decision.
“If the monthly core CPI rise manages to stay in the 0.2% range in September, that should be good enough for the Fed to hold in October,” said Scott Anderson, chief US economist at BMO Capital Markets.
“However, it won't settle the debate about whether more rate hikes are needed down the road.”
Higher interest rates generally increase the cost of borrowing for households and businesses, affecting mortgages, credit cards, vehicle loans and investment decisions. The Fed must therefore balance the need to contain inflation against the risk that tighter monetary policy could weaken economic growth and employment.
Social Security Recipients Await Cost-of-Living Adjustment
Beyond its implications for monetary policy and the midterm elections, the September inflation report is also being closely watched by millions of retirees and other Americans who depend on Social Security benefits.
The Social Security Administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W, to calculate annual cost-of-living adjustments for Social Security and Supplemental Security Income recipients.
The adjustment for 2027 will be based on the relevant third-quarter inflation figures for 2026 compared with those recorded in the third quarter of 2025.
The programmes support retired Americans, people with disabilities, and certain widows, widowers and children. For many beneficiaries, annual adjustments are essential to maintaining purchasing power as the prices of food, housing, healthcare and transportation rise.
The Senior Citizens League, one of the largest advocacy groups representing older Americans, has projected a 3.5 per cent cost-of-living adjustment for 2027. That would represent an increase from the 2.8 per cent adjustment in 2026.
Under the projection, the average monthly retirement benefit would rise by $67.90 to approximately $2,007.
However, the size of the adjustment will ultimately depend on the official inflation data used by the Social Security Administration. Even if benefits increase, recipients may find that the additional payments provide only partial relief if essential expenses continue to rise rapidly.
With food and energy costs placing renewed pressure on household finances, the forthcoming CPI report is expected to offer an important indication of whether inflation is accelerating again or beginning to moderate beneath the headline figures.
For the Federal Reserve, the findings could shape the timing of future interest rate decisions. For millions of American households, they will provide another measure of the financial challenges ahead. And for Trump and his Republican allies, the figures could further influence voters’ perceptions of the administration’s handling of the economy as the November midterm elections approach.