The annual U.S. inflation rate rose to 3.7% in September 2026, according to data released Wednesday by the Bureau of Labor Statistics. The figure represents an increase from the 3.4% rate recorded in August and exceeded market expectations of 3.6%. The Social Security Administration concurrently announced that benefits will increase by 3.6% in 2027 to match cost-of-living changes.
The rise in consumer prices was primarily attributed to higher energy costs following disruptions to Middle East energy supplies due to a conflict between the U.S., Israel, and Iran. While inflation reached a peak of approximately 9% in mid-2022 following the invasion of Ukraine and pandemic-related supply chain issues, it has remained above the Federal Reserve's 2% target. In May 2026, officials also noted that a 10% global tariff introduced by President Donald Trump contributed to price increases for consumer goods.
Gasoline prices were a significant factor in the September report, jumping 9.1% in that month alone and 34.2% over the year. Fuel oil, used for home heating, rose 74.2% annually. Beyond energy, shelter inflation accelerated to 3.2%, while costs for recreation, used vehicles, and education also increased. Conversely, food inflation slowed to 2.5% annually, down from 2.7% in August, and was flat on a monthly basis. Core inflation, which excludes volatile food and energy categories, rose to 2.6% annually.
The scale of the energy price impact is notable, with energy goods accounting for more than 40% of the broad rise in inflation during some months of the conflict. Crude oil prices, which traded near $70 a barrel before the U.S.-Israel war with Iran, have risen above $100. Research from the Federal Reserve Bank of New York indicates that for every percentage point increase in average tariffs, consumer goods prices rise by nearly 0.25% after one year. Because exporters absorbed only 10% of these tariff costs, U.S.-based businesses and consumers bore approximately 90% of the added expense.
These figures are the final major inflation data release before the November midterm elections. The Federal Reserve, which manages the benchmark interest rate, is monitoring whether energy costs will eventually drive up prices in other sectors like food. While the central bank previously held rates in the 3.50%-3.75% range, economists reported by Reuters suggested that persistent price pressures might lead to rates remaining unchanged into 2027 or could prompt further hikes. The next Consumer Price Index report is scheduled for release on November 10, 2026.