For the third straight month, workers’ paychecks did not keep pace with rising prices, the Labor Department’s final inflation report ahead of the midterm elections revealed.
U.S. consumer prices rose 0.6% from the month before in September, above forecasters’ expectations. Over the year, prices for all items were up 3.7%, surpassing August’s 3.4% pace. In comparison, average hourly earnings for employees on private, nonfarm payrolls increased 3% over the year last month.
A 9.1% rise in gas prices led the month-over-month increase in prices.
As workers struggle with the cost of living, consumer confidence is sitting at a 12-year low and 52% of Americans surveyed by WalletHub said they believe inflation is going to “ruin” Christmas this year.
Voters may be looking for political candidates who can make their lives more affordable before heading to the polls on Nov. 3, but economists say there is no guaranteethat prices will come down any time soon. Several factors are contributing to inflation’s stubbornness, including — but not limited to — war in Iran, tariffs, and the AI buildout.
While those things remain largely out of the Federal Reserve’s control, its policymakers have committed to delivering price stability. They voted to raise the Fed’s benchmark for short-term interest rates to help tame inflation last month. The Labor Department’s September report, which shows year-over-year inflation is still well above the Fed’s 2% target, will help inform their next rate decision on Oct. 28.
View of the facade as construction continues on the Federal Reserve Board building in Washington, D.C., Sept. 17, 2025.
What is the core US inflation rate?
“Core” consumer price inflation, the department’s way to measure price changes while excluding more volatile food and energy costs, rose 0.3% in September as recreation, used vehicles, education, airline fares, medical care, and apparel got more expensive.
Core CPI was up 2.6% over the year in September after a 2.4% increase in August. It’s closely watched for signs that price pressures are easing or evidence that supply shocks, like limited oil supply due to global conflicts, are beginning to raise the price of other goods and services.
Are gas prices still climbing?
A jump in gas prices drove the all-items increase again. They rose 9.1% in September, accounting for over half of the monthly all-items increase, the Labor Department said. Gas prices are up 34.2% over the year.
War in Iran, the Russia-Ukraine war, and conflict in the Red Sea are limiting the global oil supply. As of Oct. 14, futures for Brent crude, the international benchmark are trading at $106 per barrel and futures for West Texas Intermediate, the U.S. benchmark, are trading near $96.
Consumers are well aware of higher prices at the gas pump. The national average price of a gallon of regular unleaded gasoline is $4.33, up from $3.08 this time last year, according to AAA.
What about diesel?
Americans may be grateful their car doesn’t run on diesel, the average price of which is hovering near $6.30 per gallon, but much of the U.S. economy depends on it.
The rise in diesel costs is a point of concern for economists as it fuels the transportation of many goods sold in the United States and disproportionately affects truckers, farmers, and fishers. Over time, high diesel prices can lead to higher price tags for a wide range of products and services.
Under a new deal, President Donald Trump said Russia would supply hundreds of thousands of tons of diesel fuel to the American and global marketplace to bring diesel costs down. Experts are skeptical that plan will work.
“That deal is unlikely to have a meaningful impact,” Jill Cetina, a professor of finance at Texas A&M University and former vice president of bank supervision at the Dallas Fed, said. “I would view that more as a symbolic thing.”
