Inflation heated up to 3.7% annually last month as energy prices soared, according to the latest Consumer Price Index data.
The latest reading came in hot, accelerating from 3.4% in August and outpacing economists' expected 3.6% jump. On a monthly basis, prices rose 0.6% in September from 0.4% a month earlier.
Gas prices were a particularly large driver of the jump, rising 9.1% month over month. Average prices at the pump hit a record $4.33 last month, according to AAA data, nearly $0.50 above the previous monthly record set in 2023.
Fuel oil, which millions of Americans, primarily in the Northeast, use to heat their homes, was another pain point, spiraling 15.3% from August just before the cold months set in.
"Core" inflation, which strips out volatile food and energy prices and is watched more closely by Federal Reserve officials, was also hotter than expected, rising 2.6% annually, up from 2.4% in August. Monthly core inflation was unchanged from August's hotter-than-anticipated 0.3% but also came in higher than the 0.2% economists were expecting.
"Some CPI reports seem backward looking and stale, while others seem like they're foreshadowing what's to come. This one definitely feels like the latter," Jake Krimmel, senior economist at Realtor.com, said in a statement. He called the uptick in core inflation "worrying."
On a core basis, the cost of travel and leisure was a major driver of inflation. Car rental costs rose 5.4% from a month earlier, while hotels were up 2.3%. Football and soccer fans are also paying up, with the average cost of a sporting event ticket up 7.6%.
Read more: How to protect your savings against inflation
The hot readings increase the odds that the Federal Reserve will hike benchmark interest rates later this month, rather than waiting until December.
"This makes the October meeting live," Stephanie Roth, Wolfe Research chief economist, told Yahoo Finance.
Traders see close to 50-50 odds of a rate hike next month, up from less than 25% odds before the latest data was released.
Seema Shah, chief global strategist at Principal Asset Management, said in a statement that the latest report might not be hot enough to justify a hike this month, but inflation clearly remains a problem.
"The data reinforces the view that inflation remains too persistent for the Fed to declare victory," Shah said. "More than half the CPI basket is still running at an annualized pace above 3%, highlighting the breadth of price pressures across the economy."
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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This article originally appeared on Yahoo Finance at https://finance.yahoo.com/economy/article/surging-gas-prices-pushed-cpi-inflation-to-37-in-september-the-fed-is-watching-133518198.html