Prices rose faster in September
US consumer prices rose 0.6 per cent in September, up from 0.4 per cent in August, the Labor Department's Bureau of Labor Statistics said. The reading matched what economists had expected, but it confirmed that inflation is not settling quickly.
Core PCE inflation, the Federal Reserve's preferred measure, rose 3.0 per cent in the year to August. The central bank raised its benchmark rate in mid-September for the first time in three years, saying inflation remained elevated and that the move would support a timely return to its 2 per cent goal. Another increase at this month's meeting is back in play.
Economists see a bumpy last mile
"The last mile back to target could remain bumpy and keep interest rates elevated," said Jeffrey Roach, chief economist at LPL Financial. He added that the report complicates the Fed's decision this month, because the road back to price stability is looking harder to navigate.
Some forecasters expect the central bank to keep tightening. Capital Economics has projected a second quarter-point increase in December, followed by another in March 2027.
Banks and households feel the squeeze
Bank of America missed profit estimates as trading revenue weakened, a sign that volatile markets and higher borrowing costs are weighing on lenders. Households are stretched as well, and affordability has become a central theme in this year's midterm campaigns.
Food, rent and services have kept upward pressure on the index, while energy costs have swung widely. Fuel prices have also hit transport companies hard. Delta Air Lines cut its 2026 profit outlook last week, saying jet fuel expenses would rise by about $6 billion this year even as demand and revenue held up.
Policymakers are watching services inflation in particular, because it moves slowly and reflects wage growth. Rent and medical care costs have proved stubborn through 2026, and both feed directly into the core measures the Fed tracks.