September inflation rises to 3.7%, driven by high diesel prices

[00:00:00] Speaker 1: We're back with some breaking economic data. [00:00:02] Speaker 2: Inflation rose by 3.7% in September year over year and 0.6% month over month. [00:00:09] Speaker 1: NBC News business and economy reporter Allie Canal is at the big board for us. Here at the desk we've got NBC News contributor Caleb Silver. He's the chief business editor of People, Inc. and Investopedia's editor-in-chief. Allie, let's start with you. Walk us through the big numbers here, how they compare with previous months. [00:00:23] Ali: Yeah, well, inflation coming in is expected here, but still very sticky. As you mentioned, Joe, 3.7% in September compared to 3.4% in August, that monthly rise of 0.6%. That's one of the largest increases that we've seen in years. And all of this has been driven by high diesel prices. We know diesel costs are up about 75% since the war with Iran began. And this report is very important because not only does it come ahead of the midterm elections, it also comes ahead of the next Fed interest rate decision later this month. We know the Fed's target for inflation is 2% all the way down here. And right now we're just going in the wrong direction. We were actually heading towards that number earlier this year. But then with the Iran war, prices shot up. And again, we're seeing very, very sticky inflation here, guys. Caleb, tell us your reaction, what we're seeing here. [00:01:12] Speaker 4: Yeah, it's hot. And it's pretty much hot everywhere you look. The only categories, and now they'll take you through most of them, that actually saw price decreases was medical care, commodities, and used cars and trucks. Everything else is popping month after month, year after year. So these are hot prices. This is where we're going to be. Ali mentioned the election. This is the last inflation report before the election. And, of course, the Fed meeting in a week or two. This is a very serious report that tells people prices are hot and they're going to stay this way for a while. [00:01:38] Speaker 1: So, Ali, let's break it down by category. What does that tell us? [00:01:40] Ali: Yeah, so the main categories to look at here, food, energy, shelter, food coming in flat, 0%. That's a bit encouraging. But we still know prices at the grocery store are sticky. Energy prices more than doubling here, 5.2% in the month of September. And then shelter prices, that's, you know, what it costs to put the roof over your head's rent. That actually came in a little hotter for the month of September, 0.4%. And this is something that had been moderating and was an encouraging signal for the Fed. But when we start to see prices outside of energy go up a little bit, that's the concern. You don't want inflation to become entrenched here and ripple through other areas of the economy. [00:02:22] Speaker 2: Ali, let's also dig deeper into the energy price changes that we've seen here. How did this compare with last month? [00:02:27] Ali: Yeah, so, look, gas is not doing pretty well right now, right? We have 9.1% in September versus 3.9% in August. Fuel oil was an extraordinary number here. That's the cost to heat up your home. We're heading into wintertime. It was 10.1% in August. Guess how much it was in September? 15.3%. And then airline fares, they have been sticky. We've seen some of those major airliners cut routes heading into the end of the year and into 2027 due to those high prices from jet fuel. But that actually came in a little bit lower in September, a bit of a deceleration here, 1.2%. But still, we know airfare prices are hot. And experts tell us that if you haven't booked those holiday flights, you better get on that ASAP. [00:03:14] Speaker 1: I was going to say, I wish my flight was only 1.2% more expensive than last year. You mentioned the Fed here. [00:03:20] Speaker 4: They're meeting in. Yeah, 14 days, 5 hours, and 13 minutes. And there is a very, very small chance that they might raise interest rates. But that's not going to help cool inflation right now. Inflation is being driven by higher oil prices. As Ali said, you can't do much about that with a quarter-point hike. So they're in a tricky spot heading into the election, last Fed meeting before the election. I wouldn't expect much change there by the Federal Reserve. Fed Chair Worsh says he likes to not look at one month in isolation. Well, look at the past six months. We've just had rising inflation due to these higher energy prices. Not a lot the Fed can do here. [00:03:52] Speaker 2: Ali, how does the inflation number stack up with wage growth? [00:03:55] Ali: Yeah, this is a trend we've been watching closely. And it's been a trend over the past six consecutive months here with inflation now at 3.7%. Your wages are just at 3%. So the gap is getting wider here when it comes to your purchasing power, your checks. They're not going as far. And that's why the affordability picture is so top of mind right now. And it's very concerning because if more Americans start to pull back their spending, that could weigh in to economic growth here, guys. [00:04:22] Speaker 1: You know, Caleb, earlier this morning, we profiled a family, two working parents with kids, and they're struggling to make ends meet because of this very issue. The costs are going up higher than their wages. What's the best advice to people right now? [00:04:32] Speaker 4: Yeah, lock in on these prices. Inflation is going to be where it is, higher for longer, higher rates for longer, higher prices for longer. This is sort of the new normal for the economy. And consumers keep spending. We're just going deeper into debt to do it and having trouble making ends meet. [00:04:46] Speaker 1: All right. Allie Canal, Caleb Silver, thank you both. Appreciate it.