Consumer Price Index: Inflation at 3.7% in September

Inflation rose 3.7% year-over-year in September, climbing steadily higher from August's print of 3.4%. The headline figure for the Consumer Price Index (CPI) was also above economist estimates of 3.6%. On a monthly basis, consumer prices rose 0.6%, matching estimates. The increase was in large part driven by another jump in energy prices, as gasoline prices rose 9.1% — accounting for half the increase in the index.

On a "core basis," which excludes volatile food and energy prices, prices rose 2.6% year-over-year, slightly above forecasts of 2.5%, and rose 0.3% month-over-month. That was slightly above estimates of 0.2%.

Key Takeaways

Headline inflation rose to 3.7% year-over-year while core inflation climbed to 2.6% in September.
Headline prices rose 0.6% MoM from August, driven by a 9.1% spike in gasoline prices.
Current market expectations show a 63% chance of a hold at the next Fed meeting versus a 37% chance of a 25 basis-point hike.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in September after rising 0.4 percent in August, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.

The index for gasoline rose 9.1 percent in September, accounting for over half of the monthly all items increase. The energy index increased 5.2 percent over the month following a 2.1-percent increase in August. The shelter index rose 0.4 percent in September after rising 0.3 percent in August. The index for food was unchanged in September, as the index for food away from home increased 0.2 percent and the index for food at home fell 0.1 percent.

The index for all items less food and energy rose 0.3 percent in September, as it did in August. Indexes that increased over the month include recreation, used cars and trucks, education, airline fares, medical care, and apparel. Conversely, the index for communication was among the small number of major indexes that decreased in September.

The all items index rose 3.7 percent for the 12 months ending September, a larger increase than the 3.4-percent increase reported for the 12 months ending in August. The all items less food and energy index rose 2.6 percent over the year, following a 2.4-percent increase over the 12 months ending August. The energy index increased 20.4 percent for the 12 months ending September. The food index increased 2.5 percent over the last year.

The first chart is an overlay of headline CPI and core CPI since the turn of the century. The highlighted two percent level is the Federal Reserve's target inflation rate. In September, headline prices rose 3.7%, above August's reading of 3.4%. Meanwhile, core price pressures climbed from 2.4% in August to 2.6% in September.

The next chart shows both series since 1957, the year the government first began tracking core inflation.

Consumer Price Index Components

The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each, which is shown in the chart below. The BLS weighs these annually with the latest weighting taking place in December 2025.

The following table shows the annualized change in Headline and Core CPI (not seasonally adjusted) for each of the past six months. It includes the eight primary components and a separate entry for Energy, a collection of sub-indexes within Housing and Transportation. These breakdowns help illustrate how inflation impacts personal expenses based on individual exposure. For instance, the current volatility in energy and gasoline is clearly reflected in the Transportation component.

Here is the same table as above with month-over-month numbers (not seasonally adjusted).

Note: For additional information on the component composition of the Consumer Price Index, see our Inside the Consumer Price Index.

Inflation: Fed's 2% Target

The Fed is on record as having a target rate of 2% for core inflation. While the Fed traditionally uses the PCE Price Index as their preferred inflation gauge, the Consumer Price Index remains the most widely recognized measure. You can read our full analysis on how these two inflationary measures compare.

The Federal Reserve concluded its fifth meeting of the year by maintaining the federal funds rate at 3.50%–3.75%. The decision, which markets had largely priced in, keeps the benchmark rate at its lowest level since November 2022 for the fifth meeting in a row.

In a statement nearly identical to that of the prior meeting, the Committee noted, "Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy." They stated that they will "deliver price stability."

The Fed will meet again in October where they are expected to hold rates steady. At the time of writing, the CMEFedWatch Tool shows a 63% likelihood the Fed will keep rates where they are, versus a 37% likelihood of a 25 basis-point hike.

Consumer Price Index: Inflation at 3.7% in September

Key Takeaways

Consumer Price Index Components

Inflation: Fed's 2% Target

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