Inflation Climbs to 3.7%: What It Means for Your Wallets and Investments
Inflation picked up in September, giving Americans more reason to watch their budgets and giving the Federal Reserve less room to lower interest rates.
Inflation picked up again in September, giving Americans another reason to watch their budgets and giving the Federal Reserve less room to offer relief on interest rates.
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The Consumer Price Index, or CPI, showed that consumer prices rose 3.7% over the past year, up from 3.4% in August. Prices increased 0.6% during September alone, compared with a 0.4% increase the previous month. Gasoline accounted for more than half of that monthly jump.
For consumers, everyday expenses are taking another bite out of their paychecks. For investors, the question is whether stubborn inflation will push interest rates higher and make it harder for companies to grow their profits.
Gasoline was the biggest problem in September, rising 9.1% on a seasonally adjusted basis. Shelter costs also increased 0.4%. However, that has been good news for investors who jumped into oil stocks, like Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX).
There was some relief at the grocery store. Food prices overall were unchanged, while grocery prices slipped 0.1%. That helps, although a small monthly decline hardly erases the increases households have absorbed over time.
Economists also watch “core” inflation, which excludes food and energy because those prices can swing sharply. Think of it as a way to see whether inflation is spreading beyond volatile categories. Core prices rose 0.3% in September and 2.6% over the past year, compared with an annual increase of 2.4% in August. That suggests the inflation challenge extends beyond filling up the gas tank.
Could Interest Rates Go Higher?
Today’s report strengthens the argument for keeping interest rates elevated. It could also support another increase if upcoming data show that price pressures are becoming more persistent. The CME FedWatch Tool puts odds of a 25 basis-point (0.25%) interest rate hike in December at 58%.
Source: CMEGroup
The Fed already raised its benchmark interest-rate range by a quarter percentage point in September, bringing it to 3.75% to 4%. In its announcement, officials said inflation remained elevated and described the increase as a step toward restoring price stability.
The idea behind higher rates is simple. When borrowing becomes more expensive, households and businesses tend to spend more cautiously. That can cool demand and reduce the pressure on prices. But the effects take time.
There is also a limit to what interest rates can accomplish. Higher borrowing costs cannot immediately produce more gasoline or fix a supply disruption. Officials have to judge whether an energy price jump will fade or lead to broader, lasting increases.
One important distinction: the Fed’s 2% inflation target applies to the Personal Consumption Expenditures price index, or PCE. Today’s CPI report is influential, but it is not the exact measure the Fed targets.
Another rate increase is therefore a possibility, not a certainty. Employment, spending, and future inflation reports will all matter.
Consumers Could Feel Pressure From Both Directions
For households, the difficult combination is higher prices alongside expensive borrowing.
When essentials cost more, there is less money available for restaurant meals, vacations, home improvements, or savings. Families can postpone some purchases, but commuting to work and keeping a roof overhead are harder to avoid.
Borrowing can add another layer of pressure. If interest rates remain elevated, financing a car or carrying a credit-card balance can remain costly. Higher rates influence household spending through the price and availability of credit.
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For stocks, persistent inflation creates two potential problems: pressure on profits and pressure on the prices investors are willing to pay for those profits.
A company facing higher expenses has a choice. It can raise prices and risk losing customers, or absorb those costs and accept lower margins. Businesses with loyal customers and strong finances may handle that trade-off better than competitors.
Interest rates matter, too. Higher bond yields can make stocks less attractive by giving investors another place to earn income. Higher financing costs can also discourage business expansion.
That does not mean one inflation report guarantees a market selloff. Earnings, expectations, and what investors already anticipated also shape the reaction.
The next test is whether companies can keep growing while consumers face tighter budgets. Watch borrowing costs, spending trends, and management commentary. If inflation cools, that pressure could ease. If it persists, both households and Wall Street may have to wait longer for meaningful relief.
In today’s newsletter: Some Republican candidates are putting distance between themselves and Trump’s tariff policies. Ukraine defies the U.S. president to resume strikes on Russian oil refineries. And a look at Apple’s new HomeView device, which is part iPad, part Apple Watch and part CarPlay.
In a handful of battleground races, Republican candidates are speaking out against tariffs, President Donald Trump’s marquee economic policy. They’re seeking a middle ground, knowing the cost of living is a top voter concern.
Those voicing such opinions on the campaign trail include Senate candidates Sen. Susan Collins in Maine, former Sen. John Sununu in New Hampshire and former Rep. Mike Rogers in Michigan. Gubernatorial candidates with doubts over the policy include Rep. John James in Michigan and Pennsylvania state Treasurer Stacy Garrity.
America’s trade war with Canada is a particular concern for Collins and Rogers, who say they’ve spoken to Cabinet officials to get the administration to make a deal or exempt specific items from a list of tariffed goods.
Their Democratic rivals are hitting back, saying the efforts have either not gone far enough or are self-serving in the final weeks of the campaign.
Americans are almost evenly split over which party they think would do a better job of handling the economy, a recent NBC News polling average shows, with 39% preferring Democrats and 38% preferring Republicans. See the poll results here.
Federal agents have seized Rep. Ilhan Omar’s phone and subpoenaed her family members as part of an investigation into potential immigration-related crimes.
For subscribers: Republican former Rep. Mike Rogers and Democrat Abdul El-Sayed spoke about the Iran war, the economy and the issues driving the competitive Michigan Senate race in an exclusive interview with “NBC Nightly News” anchor Tom Llamas.
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Ukraine has resumed strikes on Russian oil refineries as President Volodymyr Zelenskyyangrily accused the U.S. of the “dangerous” withdrawal of intelligence sharing and restrictions on the Starlink internet services.
Kyiv held off on attacks for three days after Trump’s unilateral “energy ceasefire” announcement, but accused Russia of repeatedly violating the truce with attacks on its power grid. Trump has blamed the Ukrainian campaign for fueling a rise in energy prices, despite the impact of his own war with Iran.
Overnight, Musk said it was “time for Zelenskyy to go.”
At least some functionality of Starshield — the military version of the SpaceX service — had been restored Thursday morning, according to a source in Ukraine’s defense ministry.
In an interview with the Financial Times, published today, Zelenskyy indicated his own patience had been exhausted.
“The block (on attacking refineries) is out. We’re done,” Zelenskyy was quoted as saying. Hours later a fire was reported at an oil refinery in the western Ryazan region, Gov. Pavel Malkov said.
Apple introduced HomeView this week — a “FrankenApple creation,” as NBC News chief tech analyst Joanna Stern calls it, that combines elements of the Apple Watch, an iPad and the iPhone’s CarPlay functionality onto a $299 device. It’s the company’s answer to Amazon’s Echo Show and Google’s Nest Hub.
Here are the basics: The HomeView has a 7-inch-square Liquid Retina touchscreen that includes a 12-megapixel camera for FaceTime and mirror mode. Widgets can be customized like an Apple Watch. And it can recognize six people, presumably family members.
Notably, users will need to have an iPhone or an iPad to even use the HomeView in the first place. But, Stern writes, “for those of us who have Apple HomeKit gear all over our homes, this new product might just be… a good idea?”
Days after a roller-coaster death this week at Six Flags Over Georgia, preliminary findings suggest that 42-year-old Hassan Jihad Ibn Kariem was “ejected” from the Goliath ride and fell to his death, according to the Cobb County Police Department. The ride remains closed, and nine similar rides have been temporarily shut down across Six Flags’ North American parks.
The incident in Georgia, combined with recent allegations that some people who rode the X2 roller coaster at Six Flags Magic Mountain in California suffered “catastrophic” brain injuries, shed light on the lack of federal oversight for amusement park rides.
A 1980s court ruling stripped the U.S. Product Safety Commission of its power to oversee rides at “fixed-site parks.” Since then, a disjointed network of state regulations and voluntary industry guidelines has sprouted in its place. While safety standards have been adopted, experts say they’re voluntary, and every state takes different approaches when it comes to compliance.
Chick-fil-A is a company that cherishes its past. The recipe for its signature chicken sandwich hasn’t changed in 60 years. It has been a private, family-owned business from the very beginning.
But Chick-fil-A and the fast-food industry broadly are contending with a changing consumer. People are eating in and consuming less as rising costs squeeze Americans’ budgets and as GLP-1s shrink people’s appetites.
A restaurant industry expert told me you’d expect fast-food spots to benefit from consumers who are cutting back on spending. But that’s not what we’re seeing. Foot traffic at fast-food restaurants from January through September this year is 2% lower than during the same period last year. And yet foot traffic at Chick-fil-A is 5.7% higher.
Prince Harry and Meghan, the Duchess of Sussex, were making their first royal-style public appearance together today since they returned to the U.K. with their two children, visiting three charities on a tour of Nottingham.
Advocates are fighting to ensure that two potential witnesses who were handcuffed in the back of an ICE vehicle that struck and injured a Houston man are not deported.
A new formula of sunscreen is available in the U.S. for the first time in 25 years, catching up to Europe and other parts of the world after the FDA approved a key skin-protecting chemical.
For subscribers: A new study offers an answer to the question of how microplastics damage people’s bodies and calls into question a long-held assumption.
