Inflation heats up again, data shows, days before midterm elections where cost of living dominates

An inflation gauge closely monitored by the Federal Reserve accelerated last month, showing that prices remain elevated less than a week before midterm elections in which affordability concerns have become a central issue.

Consumer prices rose 3.6% in September from a year earlier, the Commerce Department said Thursday, up from 3.4% in August. On a monthly basis, prices climbed 0.5%, up from 0.3% in August and the highest figure since May.

Annual inflation has worsened since the Iran war caused spikes in oil and gas prices. U.S. oil prices still top $100 a barrel, up from less than $70 before the war. Polls show that the rise in inflation has soured most voters on the economy and President Donald Trump's handling of rising costs. Trump campaigned in 2024 on lowering prices, including bringing the cost of gas below $2 a gallon. It currently averages about $4.25 a gallon nationwide.

Excluding the volatile energy and food categories, inflation also picked up. It increased 3.1% from a year ago in September, up from 3% in August. And from August to September, core prices rose 0.3%, the same as the previous month.

Separately, the government also said the economy grew at a 3.4% annual rate in the July-September quarter, much faster than the 2.2% growth in the April-June quarter, as consumer spending jumped and business investment rose, fueled by spending on artificial intelligence infrastructure.

The reports come a day after the Federal Reserve, the agency tasked with combatting inflation, left its key interest rate unchanged. With inflation above the Fed's 2% target and the economy charging ahead, the central bank will remain under pressure to raise rates at its next meeting in December.

Thursday's inflation data comes from the personal consumption expenditures price index, which typically echoes the better-known consumer price index published earlier this month. The Fed more closely monitors the PCE index because it puts less weight on housing prices and allows for changes in consumers' shopping habits.