Inflation may intensify in September, as one of the last price reports the government will release ahead of the midterm elections, which are deeply influenced by concerns about the cost of living.
According to a survey by FactSet's economists, consumer prices are expected to rise 3.61 TP3T year-over-year in September, up from 3.41 TP3T in August. The Labor Department will release the report Wednesday morning.
The month-on-month price is expected to rise by 0.61 TP3T from August to September, up from 0.41 TP3T in the previous month, and the largest increase since April.
These data likely highlight the ongoing impact of the Iran war on oil prices and the persistent nature of inflation. While inflation has fallen sharply since peaking at 9.11 TP3T in 2022, it has rebounded since the outbreak of the war in late February. This persistently high inflation is posing a political challenge to Republicans in Congress and putting pressure on the Federal Reserve System, which is mandated by Congress to maintain price stability.
Persistent high inflation has impacted Trump's approval ratings among American voters. An Associated Press-NORC poll shows that only 171% of American adults approve of his handling of the cost of living, and a record low of only 261% approve of his overall economic management.
Excluding the volatile food and energy sectors, core prices are projected to rise by 2.51 TP3T year-over-year in September, slightly higher than August's 2.41 TP3T. While close to the Federal Reserve's 21 TP3T inflation target, this level has remained roughly unchanged since January of this year, just before the Iran war. Core prices are projected to rise by only 0.21 TP3T month-over-month.
Federal Reserve officials are closely monitoring inflation data to determine whether it is necessary to raise short-term interest rates further, and by how much.
Federal Reserve Chairman Kevin Walsh said last month that inflation had failed to return to the central bank’s target quickly, so he raised interest rates to about 3.91 TP3T, the first increase in three years.
Walsh stated bluntly at a press conference: "Inflation is too high and has lasted too long." He added that the summer inflation report did not show any significant improvement in the underlying trend.
However, some key Federal Reserve officials have suggested that the central bank could wait to make a decision on raising interest rates. The Fed will hold its policy meeting on October 27-28, but most investors on Wall Street expect rates to remain unchanged at that time, with another rate hike likely in December. The Fed anticipates only one rate hike this year.
By raising borrowing costs, the Federal Reserve hopes to slow consumption and growth, and cool price increases. However, much of the current inflation stems from supply shocks, such as oil and gas supply disruptions caused by the war with Iran, and raising interest rates cannot solve these bottlenecks.
Walsh stated that his goal is to prevent soaring oil prices from impacting more sectors of the economy. Currently, airfares have already increased by approximately 231 Tb/3. Oil prices surged by about 91 Tb/3 from August to September, a significant increase that will drive overall inflation sharply higher. Rising oil prices are a clear indicator of inflation and often diminish consumer confidence in the economy.
Although oil prices have fallen somewhat in recent weeks, they remain higher than a month ago. On Tuesday, the national average price was $4.34 per gallon, a few cents higher than a month ago.
These costs have increased transportation and other expenses for many businesses, large, medium, and small, some of which have had to pass on the costs to consumers. Last week, PepsiCo announced it would raise prices on its snacks, including Doritos, Emerald Chips, Sunshine Chips, and some beverages, to offset pressure from rising fuel, aluminum, and food ingredient prices.
The rapid development of artificial intelligence has also significantly increased the cost of semiconductors, computer equipment, and electrical components, ultimately leading to price increases in consumer electronics such as gaming devices, laptops, and smartphones.
On September 1st, Nintendo raised the price of its Switch 2 gaming system by 111 Tb3T, now priced at $499.99. Meanwhile, Apple's latest iPhone 17 saw a price increase of approximately 101 Tb3T compared to its previous upgrade, though this increase may be partly due to enhanced features.
common problems
What is the expected inflation rate for September?
Consumer prices are projected to rise by 3.61 TP3T year-on-year and 0.61 TP3T month-on-month in September.
What is the Federal Reserve's view on inflation?
Federal Reserve officials said inflation was too high and had lasted too long, and that they needed to closely monitor data to decide whether to raise interest rates.
What impact will rising oil prices have on the economy?
Rising oil prices have led to increased transportation and other costs, forcing many businesses to pass these costs on to consumers and impacting overall economic confidence.
How do consumers rate Trump's economic policies?
The survey shows that only 261,000,300 American adults approve of Trump's handling of the economy, indicating low approval ratings.
