US inflation rises more than expected ahead of midterms

Inflation in the United States rose more than expected to 3.7 per cent in the year to September, driven largely by soaring fuel prices amid disruptions to energy supplies linked to the conflict involving the US, Israel and Iran.

The latest figure, released by the US Bureau of Labor Statistics, represented an increase from 3.4 per cent recorded in the 12 months to August, adding to concerns about the cost of living ahead of the country’s midterm elections next month.

According to the BBC, the figures marked the final major inflation data release before the November elections, in which economic pressures are expected to be a key issue for voters.

Gasoline prices were a major contributor to the increase. The cost of motor fuel rose by 34.2 per cent over the 12 months to September and increased by 9.1 per cent in September alone.

The monthly rise in gasoline prices accounted for more than half of the overall increase in inflation, according to the Bureau of Labor Statistics.

Energy inflation climbed by 20.4 per cent over the year, while fuel oil prices, which affect households that rely on oil for heating, increased by 74.2 per cent.

The increases have been linked to disruption in Middle Eastern energy supplies following the conflict involving Washington, Israel and Tehran. Crude oil prices, which were slightly above $70 per barrel before the conflict began, have since risen above $100, increasing costs across the energy sector.

However, not all prices rose at the same pace. Food prices remained relatively subdued, recording no overall monthly increase in September and rising by 2.5 per cent over the year.

Core inflation, which excludes food and energy prices because they can be volatile, stood at 2.6 per cent.

Economists are watching closely to determine whether higher energy costs will spread to other parts of the economy, including food, transport and the production of goods. A broader increase could make it more difficult for the Federal Reserve to bring inflation towards its 2 per cent target.

Trade policy has also contributed to concerns about consumer prices. President Donald Trump introduced tariffs on imports from numerous trading partners during his second term, arguing that the measures would encourage domestic manufacturing and increase government revenue.

Research by the Federal Reserve Bank of New York found that foreign exporters absorbed relatively little of the additional tariff costs, leaving US businesses to bear most of the burden. Companies may pass some of these costs on to consumers through higher prices.

Inflation in the United States reached about 9 per cent in 2022 following pandemic-related supply chain disruptions and a surge in energy prices after Russia launched its full-scale invasion of Ukraine.

Although the current rate remains below that peak, the latest increase could intensify public concern about household expenses.

With fuel prices rising and inflation remaining above the Federal Reserve’s target, the figures present an economic challenge for the Trump administration as voters prepare to decide control of Congress in November.

(BBC)