US inflation rises to 3.7% ahead of midterm elections

US consumer inflation rose to 3.7% in the year to September, official figures show. It was the final inflation release before next month’s midterm elections, which are being fought in large part over the cost of living.

The figure exceeded forecasts, after annual inflation stood at 3.4% in August. Petrol was the main driver as prices rose following disruption to Middle East energy supplies linked to the US-Israel conflict with Iran.

Petrol drove most of the increase

Vehicle fuel prices were 34.2% higher than a year earlier and rose 9.1% in September alone. The Bureau of Labor Statistics said petrol accounted for more than half of the overall monthly increase in inflation.

Overall energy inflation rose 20.4% over the year. Fuel oil, used to heat homes, increased by 74.2%.

Food and core inflation

Food prices were unchanged in September and rose 2.5% over the year. Core inflation, which excludes food and energy, was 2.6%.

Economists said the Federal Reserve would watch whether higher energy costs begin to affect other parts of the economy, including food prices. The Fed’s inflation target is 2%.

Tariffs add to price pressures

Research by the Federal Reserve Bank of New York found that each one-percentage-point increase in average tariffs led to an almost 0.25% rise in consumer-goods prices after one year. US businesses absorbed nearly 90% of the cost of additional tariffs because overseas exporters reduced their prices only slightly.

Separately, the Social Security Administration announced a 3.6% increase in benefits for 2027. The average retirement payment will rise by about $75 a month, with the January adjustment affecting about 72 million people.