US inflation hits 3.7% in September, hurting Republicans before midterms

· Economy · United States

US consumer prices rose 3.7% in the year to September, the fastest pace in five months, driven by higher gasoline and energy costs linked to the Iran war. The monthly increase and core gauge both exceeded forecasts, keeping pressure on household budgets. The final inflation report before the November 3 midterm elections puts cost of living at the centre of the campaign, with Republicans facing voter anger over prices under President Donald Trump. Markets reacted by pricing in a possible Federal Reserve rate hike as soon as this month, and a top forecaster said a half-point increase in December could be on the table. Stocks fell, with chipmakers leading declines, the dollar reached its highest since May 2025, and gold slumped.

Why it matters：The report shapes the Fed's next move and the US election outcome, with global spillovers through the dollar, bond yields and energy-driven inflation.

Key points

  • Gasoline and energy prices linked to the Iran war drove the increase.
  • Markets now see a possible Fed hike this month, with a half-point move floated for December.
  • The dollar hit its highest since May 2025 and gold fell.

Sources (original reporting)

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