Labor Department to release latest inflation report : NPR

Higher energy prices, tied to the U.S. war with Iran, are driving up the overall cost-of-living. The Labor Department is set to deliver its latest inflation report this morning.

STEVE INSKEEP, HOST:

Just as the nights are growing colder, inflation is heating up – a bad combination. We got an update this morning on the cost of living for September, and NPR’s Scott Horsley is here with – doesn’t sound really good, Scott. What’s the news?

SCOTT HORSLEY, BYLINE: Yeah. It’s not great news. The inflation got worse last month. Consumer prices in September were up 3.7% from a year ago. Economist Brian Bethune at Boston College says that’s an even bigger annual increase than the month before.

BRIAN BETHUNE: It’s not looking good. The main problem, of course, what everybody already knows, is gasoline prices, but also heating oil.

HORSLEY: Heating oil is a close cousin to diesel fuel, and we know those prices have skyrocketed in recent months. Gas prices are up about a buck 35 a gallon from where they were before the U.S. launched its war against Iran. And even if you strip out the wartime spike in energy prices, inflation in September was higher than the month before. Some of that’s due to the artificial intelligence boom, which has raised prices for anything that has a memory chip.

INSKEEP: Ah.

HORSLEY: Apple, for example, just raised the price of its even older model iPhones by about a hundred dollars apiece.

INSKEEP: Wow. That’s not a small hike. How are people keeping up?

HORSLEY: It’s not easy. You know, average wages in September were up just 3% from a year ago. So if prices are going up 3.7%, the typical worker is losing ground. You can tighten your belt to some extent, but, you know, if you got to put gas in the car to get to work or get the kids to school, you don’t have a whole lot of choices.

INSKEEP: No.

HORSLEY: Some people are draining their savings accounts. Some are running up a balance on their credit cards. Bethune says it’s not surprising a lot of people feel frustrated with this economy.

BETHUNE: People are kind of saying something isn’t right with that. I’m working harder. I’m more productive, and this is not a square deal.

HORSLEY: Today’s inflation report is an important one because it’s the last piece of a puzzle used to calculate the cost-of-living adjustment that Social Security recipients will get next year. We now know benefits will go up 3.6% starting in January, which means the average retiree will get an extra 75 bucks a month. That’s not a windfall, though. It’s just enough to allow people who depend on Social Security to keep treading water. Still, in this economy, treading water is better than the average worker is able to do.

INSKEEP: Well, what’s it going to take to make that water go down a little bit?

HORSLEY: Yeah. Hard to say. Every time inflation starts to ease, we get hit by another supply shock. Last year, there was President Trump’s double-digit tariffs. This spring, we had the war with Iran. Now there’s another round of tariffs and the artificial intelligence boom to contend with. Beth Hammack, who’s the president of the Cleveland Federal Reserve Bank, worries that inflation is becoming more entrenched. She gave a speech this week where she talked about a Cleveland area retailer she’s heard from who’s raising prices not just to cover today’s costs, but even higher costs expected in the future.

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BETH HAMMACK: This could be a sign that an inflationary mindset is taking hold. When people expect higher prices, they make decisions with this in mind. It can become a self-fulfilling prophecy that makes it harder for monetary policy to bring inflation back down.

HORSLEY: The Federal Reserve typically fights inflation by raising interest rates. The central bank has two more meetings scheduled this year, and after this morning’s inflation report, investors see about a 50/50 chance that the Fed decides to raise its benchmark interest rate at its October meeting in two weeks.

INSKEEP: NPR’s Scott Horsley. Thanks for the update.

HORSLEY: You’re welcome.

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