US Inflation Rises More Than Expected to 3.7% in Sept
US annual inflation rose to 3.7% in September 2026, driven by higher gasoline prices and the impact of Donald Trump's import tariffs ahead of the midterm elections.
Stock photo for illustration only, not from the actual event
- US annual inflation for the 12 months to September 2026 rose to 3.7%, up from August's 3.4% level.
- Gasoline prices surged 34.2% over the year and jumped 9.1% in September alone.
- Social Security benefits will increase by 3.6% in 2027, adding an average of $75 a month for retirees.
- President Donald Trump's 10% global tariffs forced US businesses to absorb nearly 90% of the added import tax costs.
According to official figures released by the US Bureau of Labor Statistics, annual inflation rose by more than expected in the year to September 2026, reaching 3.7% compared to 3.4% in the 12 months to August. This final data release arrived just ahead of next month's midterm elections, where cost of living pressures have emerged as a central political battleground across the United States.
The higher-than-expected inflation was primarily driven by surging gasoline prices, which escalated following Middle East energy supply disruptions linked to the US-Israel conflict with Iran. Crude oil, which traded at just over $70 a barrel before the conflict, climbed past $100 a barrel as supplies tightened.
Car fuel prices jumped 34.2% over the 12-month period, with a 9.1% spike recorded in September alone, accounting for more than half of the month's overall inflation increase. Meanwhile, overall energy inflation rose 20.4% annually, driven by climbing costs for fuel oil, energy services, and electricity, with home heating fuel oil surging 74.2% over the year.
Stock photo for illustration only, not from the actual event
Despite energy costs climbing rapidly, food inflation remained subdued, staying flat over the month of September and registering a 2.5% increase across the year. Core inflation, which excludes food and energy prices, stood at 2.6%. Experts noted that the US Federal Reserve will monitor closely whether escalating energy expenses begin to feed into broader areas of the economy like food prices.
"Higher tariffs - which are levies that businesses pay on the goods they import - directly raise prices for US companies unless the overseas firms they are buying from lower prices to absorb some of the cost."
Federal Reserve Bank of New York Research
Trade policies have also played a significant role in price movements. Since returning to office, President Donald Trump introduced tariffs on major US trading partners. Following a Supreme Court ruling against earlier global levies, the administration immediately introduced a new 10% global tariff. Research from the Federal Reserve Bank of New York revealed that foreign exporters reduced their prices very little, leaving US-based companies to absorb nearly 90% of the tax burden. Indirectly, higher tariffs also impacted locally made goods because many domestic producers rely on foreign parts, with every percentage point increase in average tariffs leading to a nearly 0.25% rise in consumer goods prices after one year.
Although current inflation remains above the Federal Reserve's 2% target, it sits well below the 9% peak witnessed during pandemic-era supply chain bottlenecks and the 2022 Ukraine war oil shock. The intersection of geopolitical energy shocks and aggressive trade tariffs highlights the complex domestic economic landscape, turning everyday price changes into a critical factor for voters and policymakers alike.
Shortly following the inflation announcement, the Social Security Administration stated that benefits—including old age, survivors, and disability insurance—will rise by 3.6% in 2027. This adjustment will increase average retirement benefits by $75 a month, taking effect in January for approximately 72 million people, while enhanced payments for 7.2 million supplemental security income recipients will start on December 31.
Source: BBC World
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