GOP midterm woes got worse.........

Hot inflation data adds to GOP midterm woes

The numbers are feeding investor bets that the Fed might hike rates again later this month.

By Victoria Guida

Inflation unexpectedly accelerated in September due to soaring prices at the pump, boosting the chances of another Federal Reserve interest rate increase and dealing another blow to Republicans before next month’s congressional elections.

The consumer price index rose 3.7 percent over the 12 months ended in September, driven by the jump in gas prices, which accounted for over half the cost increases, the Labor Department said Wednesday. But prices beyond more volatile food and energy costs also rose more than projected, as consumers continue spending at a robust clip.

The numbers are feeding investor bets that the Fed might hike rates again later this month, with markets pricing in roughly even odds that it will raise borrowing costs or hold them steady, according to CME’s FedWatch tool. But before the data release, senior central bankers suggested they were willing to be patient as they monitored the trajectory for inflation.

That messaging might still keep the Fed on the sidelines, at least until the December meeting, but the September data has now reinvigorated the specter of an interest rate hike for the second month in a row, just days before Election Day. Such a move would likely enrage President Donald Trump, who has continued to push for lower rates but so far has not attacked his new Fed chief, Kevin Warsh.

For their part, Fed officials are trying to suss out how much of the price increases are being supported by unsustainable economic activity versus temporary shocks to the supply of goods, fed by foreign policy, that will eventually fade. The risk for them, as well as for any politician running in 2028, is that failing to contain inflation now could mean the Fed will have to act even more aggressively to control it later.

White House economic adviser Kevin Hassett called the hot September CPI number “disappointing.” He argued that the president’s policies are “helping to keep inflation down” but added, “the energy shock is really the headline story today.”

Omair Sharif, president of Inflation Insights, pointed to signs that tariffs are still pushing up costs, such as prices for sporting goods and toys.

“The surprise was not concentrated in any one item … but instead reflected a number of components showing strength,” Sharif wrote in a note to clients.

A recent analysis on the tariff burden for midsize businesses by the JPMorgan Chase Institute found several manufacturing industries now spend more than 2% of their cash inflows on tariffs.

“Is this expense on the same level as your commercial lease or your payroll? No,” said Chi Mac, business research director at the institute. “But this is not a small amount.”