U.S. inflation rises to 3.7% in September report

Across the country, states have passed temporary fuel tax suspensions as oil and gas prices continue to rise. Orphe Divounguy, founder and chief economist of Quantitative Research Group and a former Zillow economist, said the suspensions do not substantially change a household's fuel bill. 

The suspensions, in Ohio, North Carolina and Georgia began in October. The delayed timeline means state progress has little effect on September's report. 

"The benefit is a smaller bill than the household would otherwise face; it does not necessarily free up money for other spending," Divounguy told The Center Square. "Actual relief depends on local prices and how much of the tax cut reaches consumers."

Annual core inflation increased by 0.3% in September for an increase of 2.6% over the year after August saw a 2.4% increase. Divounguy said rising energy prices continuing to drive up core inflation could be a cause for concern. 

"The question is whether higher energy costs keep spreading into other prices, or whether weaker demand forces businesses to absorb more of those costs," Divounguy said. 

With the Fed scheduled to meet again this month, Divounguy said he still favors a pause in another rate hike.

"Gasoline drove over half the headline increase," Divounguy wrote Wednesday in a blog post. "Most of the prices running hotter are tied to fuel: gasoline, heating oil, airfares and transportation services. 

"Core services inflation was cooling before the [Iran] war. The oil shock interrupted that progress. The prices that usually signal an overheating economy, such as rent, homeowners' housing costs, medical services and restaurant meals are holding up steady or cooling slightly."

Jeffrey Roach, chief economist for LPL Financial, highlighted how energy prices are having a greater effect on other economic indicators. He said the Federal Reserve's latest interest rate hike will make future decisions more difficult.

"Inflation pressures are broadening beyond energy, suggesting the last mile back to target could remain bumpy and keep interest rates elevated," Roach said in a statement to The Center Square. "The latest report complicates the Fed’s decision this month, as the road back to price stability is looking increasingly difficult to navigate."

The September jobs report, released on Oct. 2, showed wage growth slowed to 3%, lower than overall inflation. Divounguy warned of a continued gap between prices and wage growth remaining a persistent problem for American families. 

"Households are feeling the pressure," Divounguy said. "When spending outpaces income, households have less room to save."

Overall, the energy index rose by 20.4% in the last year. Fuel oil rose by 74.2% over the last year. Food at home saw a decrease of 0.1% in September as it rose 1.8% over the year. 

"Families should plan around their actual grocery bills, fuel use, utility rates, rent renewals, insurance premiums and debt payments," Divounguy told The Center Square. "Their experience depends on what they buy, which can differ considerably from the national average."