US inflation accelerates, reviving expectations of another Fed rate hike

U.S. consumer inflation accelerated in September, strengthening expectations that the Federal Reserve could raise interest rates again before the end of the year.

The Consumer Price Index rose 0.6% from August and 3.7% from a year earlier, the Labor Department reported Wednesday. Gasoline prices surged 9.1% and accounted for more than half of the monthly increase. Excluding food and energy, prices increased 0.3%, above economists’ forecast for a 0.2% rise, as shelter, recreation, education, used vehicles and airfares became more expensive.

The figures put a rate increase at the Fed’s October meeting back under consideration, although market pricing before the report had placed greater odds on a December move. Minutes from the central bank’s previous meeting showed that most officials considered another increase in the federal funds rate’s target range likely to be appropriate by year-end, while emphasizing that decisions would depend on incoming data and evolving risks.

Fed Governor Christopher Waller also said further increases were needed to restrain inflation, though they did not have to occur at consecutive meetings. Minneapolis Fed President Neel Kashkari said softer inflation data released earlier had not materially changed his outlook.

The dollar recently reached a 16-month high as traders anticipated continued Fed tightening. Rising oil prices and elevated bond yields have added to inflation concerns, with Brent crude briefly moving above $105 a barrel after attacks on Saudi oil facilities.