US consumer inflation rises more than expected in September

US consumer inflation exceeded expectations in September, according to government data released on Wednesday. The month-on-month increase was 0.6%, compared to 0.4% in August. This rise was primarily driven by a surge in energy costs, with gasoline prices jumping 9.1% month-on-month and energy prices overall climbing more than 15% from February when the US and Israel attacked Iran. The year-on-year inflation rate reached 3.7%, surpassing the 3.6% forecast by analysts.

The increase in prices stems from geopolitical tensions between the US and Iran, which have led to a blockade of the Strait of Hormuz, a crucial oil and gas shipping route. Consequently, gasoline prices have soared by over 45% since the conflict, reaching an average of US$4.33 per gallon in the US. Diesel prices have also risen by 67.7%, further straining consumers as the cost of transporting goods increases.

Economist James Knightley from ING noted that the Iran-US conflict has resulted in higher motor fuel costs that Americans are now experiencing. He also mentioned that rising airline fares could contribute to additional price pressures. Despite the overall strength of the US economy, bolstered by substantial spending on artificial intelligence, economists anticipate that higher costs may persist as they filter through to households.

While the latest report does not appear likely to prompt the Federal Reserve to raise interest rates during its upcoming meeting on October 27-28, some policymakers have suggested a cautious approach. They believe that there is no immediate need for consecutive rate hikes. Instead, they favor a gradual and steady increase in interest rates to mitigate the impact of inflation on various industries, including housing, which is already facing challenges due to elevated borrowing costs.