Costlier Food, Fuel Drive September Wholesale Inflation To Record 11.39%

Inflation in the United States surged upwards in September, according to data released by the Labor Department on Wednesday. The Consumer Price Index (CPI) for goods and services increased by 3.7% compared to the same month last year. This is based on an analysis of the increase from August to September, which was recorded at 0.6%.

Economists had anticipated a further intensification of the price pressure, but at a reduced rate. It is expected that this trend will continue, with inflation expected to surpass the four percent threshold by the end of the year. Immediately after the publication, there was a reaction on the bond markets. The yield on 10-year Treasury notes jumped by more than nine basis points to 5.31% after the publication.

It had already been climbing to 5.37% in the previous week. The data is particularly significant as the midterm elections in early November are approaching, when the House of Representatives and parts of the Senate will be up for re-election. A weak performance is expected for President Donald Trump's Republican party. The President himself has seen his approval ratings fall over the past five years.

Inflation has been above the Federal Reserve's two percent target for more than five years. Trump has blamed the previous administration's Joe Biden for the initial inflation dynamics. He promised to lower living costs upon taking office. Energy is the biggest driver of price increases, with a 20.4% increase in September. Diesel prices reached new highs due to the conflict in the Middle East.

Trump announced controversial diesel deliveries from Russia, with Russia initially providing 300,000 tonnes to the US and the global market. While energy inflation is the main contributor, core inflation has also risen, increasing from 2.4% to 2.6%. The latter is higher than expected. The core rate reflects inflation excluding volatile items like energy and food.

Investors anticipate further steps from the Fed due to persistent high inflation. The monetary authorities have already acted, raising the policy interest rate for the first time in three years during their latest meeting to between 3.75 and 4.0%. Further steps are likely, contrary to Trump's clear desire for low interest rates.

Economic growth, as measured by Gross Domestic Product, increased by 2.2% in the second quarter of the year, and economists expect strong data for the third quarter, which will be released at the end of October. The International Monetary Fund (IMF) projects a 2.3% growth for the US economy in its latest World Economic Outlook for the entire year.

The IMF's economists also expect a value of 2.3% for 2027. "High growth dynamics combined with high inflation and near-full employment offer little pretext for interest rate cuts," says Harvard economist Kenneth Rogoff.