Industry Study
2026 Inflation Study
Last updated 10/14/2026 by
Andrew Latham
Edited by
Miron Lulic
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What happened
On October 14, 2026, the Bureau of Labor Statistics reported that the Consumer Price Index rose 0.6% in September on a seasonally adjusted basis, after a 0.4% increase in August. Gasoline rose 9.1% in the month and accounted for more than half of the overall increase.
Year over year, headline inflation hit 3.7%, up from 3.4% in August and 3.0% a year earlier. Economists had expected 3.6%. The rate is below the 4.2% peak reached in May, when the first wave of the energy shock hit, but it has now climbed for two straight months.
Core CPI rose 0.3% in September and 2.6% from a year ago, both a tenth above forecasts. Used cars, airline fares, apparel, medical care and recreation all rose in the month. Food was flat for the month and up 2.5% over the year, with grocery prices (food at home) up just 1.8%. Shelter rose 0.4% in the month and 3.2% over the year.
The underlying picture, then, is the same one that has defined 2026: energy is driving the headline, and the rest of the basket is close to normal. The difference now is that the energy shock has lasted long enough for the Fed to stop looking through it. For a practical, household-level look at the September numbers, see our companion piece on where your budget is really getting hit.
The two-front inflation problem, eight months in
America is still dealing with two distinct inflation pressures at once, and they call for opposite policy responses.
Front 1: The Iran war energy shock. The U.S.-Israeli conflict with Iran began on February 28. Gasoline rose a record 21.2% in March alone, the largest monthly increase since the BLS began tracking the category in 1967, and the energy index jumped 10.9% that month. Prices eased over the summer, then climbed again in September, when energy rose another 5.2%. Over the past 12 months, energy is up 20.4%, gasoline is up 34.2% and fuel oil is up 74.2%. Oil flows through the Strait of Hormuz have partly recovered, but shipping and insurance costs for Gulf crude remain far above prewar levels. Moody’s Analytics estimates the conflict has cost U.S. consumers about $265 billion so far, or roughly $2,000 for the average household. Raising interest rates won’t produce more oil, which is why these are the hardest price increases for the Fed to address.
Front 2: Tariff-driven goods inflation. Even before the war, underlying inflation was running above the Fed’s target. Tariffs enacted in 2025 continue to push up prices on imported goods. The Budget Lab at Yale put the average statutory tariff rate at 11.0% as of August 24, 2026, with scheduled increases taking it to about 11.8% by the end of the year. Yale estimates the ultimate consumer price effect at about 0.7% and the cost to a typical household at about $1,100 a year. Apparel is up 3.4% over the past year, and new vehicle prices are up 0.6%.
The result is an inflation picture that looks worse than the underlying trend, and a Fed that has decided it can no longer wait for the energy shock to fade on its own.
Why it matters
For consumers, the impact is immediate. AAA put the national average for regular gasoline at $4.33 a gallon on October 14, up from $3.08 a year earlier and just under $3 before the war. Diesel is near $6.30, which pushes up freight costs and, eventually, the price of everything that moves by truck. Airline fares are up 22.4% from a year ago. The ripple effects are now showing up in services, which is why core inflation ticked up in September.
For the Fed, the dilemma has sharpened. The economy is clearly slowing. Employers added just 29,000 jobs in September, far below the 84,000 economists expected, and the unemployment rate rose to 4.2%. Over the past 12 months, job growth has averaged about 45,000 a month. In a normal slowdown, the Fed would be cutting rates. Instead it raised them, because it judged that inflation was not returning to its 2% goal fast enough after seven months of elevated headline readings.
That is the textbook definition of a stagflation risk: slowing growth, rising prices and a central bank that cannot fix both at once.
Fed rate policy and impact
At its September 15 and 16 meeting, the Federal Open Market Committee voted 12 to 0 to raise the federal funds rate by a quarter point, to a target range of 3.75% to 4.00%. It was the first increase since July 2023 and reversed the last of the six cuts the Fed made between September 2024 and December 2025, which had lowered the range by a cumulative 1.75 percentage points. The statement said “inflation remains elevated” and that the increase supports “a timelier return to the Committee’s 2 percent goal.” Chair Kevin Warsh said the Fed’s standard for action, that underlying inflation is moving to target “clearly and at sufficient speed,” had not been met.
The September Summary of Economic Projections shows where officials think this goes. The median participant expects the federal funds rate to end 2026 at 4.1%, which implies one more quarter-point hike at either the October 27 and 28 meeting or the December 8 and 9 meeting. The median projection holds the rate at 4.1% through 2027 before cuts in 2028. Officials raised their inflation forecasts too: PCE inflation of 3.7% for 2026 (up from 3.6% in June) and core PCE of 3.4%, falling to 2.3% and 2.5% in 2027.
After the September CPI report, CNBC reported that futures markets put the odds of another hike before year-end above 96%.
| FOMC Meeting Date | Rate Change (bps) | Federal Funds Rate | Context |
| Sep 15 to 16, 2026 | +25 | 3.75% to 4.00% | First hike since 2023; inflation “remains elevated” |
| Jul 28 to 29, 2026 | 0 | 3.50% to 3.75% | Hold; energy shock persisting |
| Jun 16 to 17, 2026 | 0 | 3.50% to 3.75% | Hold; projections cut to one 2026 cut |
| Apr 28 to 29, 2026 | 0 | 3.50% to 3.75% | Hold; headline inflation accelerating |
| Mar 17 to 18, 2026 | 0 | 3.50% to 3.75% | Hold; Iran war uncertainty |
| Jan 27 to 28, 2026 | 0 | 3.50% to 3.75% | Pause to assess after three cuts |
| Dec 9 to 10, 2025 | -25 | 3.50% to 3.75% | Third consecutive cut |
| Oct 28 to 29, 2025 | -25 | 3.75% to 4.00% | Continued easing during shutdown |
| Sep 16 to 17, 2025 | -25 | 4.00% to 4.25% | Easing resumes; labor market softening |
| Dec 17 to 18, 2024 | -25 | 4.25% to 4.50% | Third cut of easing cycle |
| Nov 6 to 7, 2024 | -25 | 4.50% to 4.75% | Second cut of easing cycle |
| Sep 17 to 18, 2024 | -50 | 4.75% to 5.00% | Start of easing cycle |
| Jul 25 to 26, 2023 | +25 | 5.25% to 5.50% | Peak rate of the 2022 to 2023 hiking cycle |
Source: Federal Reserve Board. Target range shown is the range in effect after each meeting.
Energy: The shock that won’t fade
The March 2026 energy price spike remains historic by any measure. Gasoline rose 21.2% in a single month on a seasonally adjusted basis, the largest monthly increase since the BLS first published the series in 1967, and fuel oil surged 30.7%. Energy prices then retreated through the early summer as the Strait of Hormuz partly reopened.
September brought a second leg. The energy index rose 5.2% in the month, gasoline rose 9.1% and fuel oil rose 15.3%. Electricity rose 0.2% and natural gas fell 0.3%. Over the past 12 months, energy is up 20.4%, gasoline is up 34.2%, fuel oil is up 74.2%, electricity is up 4.4% and natural gas is up 5.0%.
Economists caution that energy prices tend to rise quickly during disruptions and fall much more slowly afterward, a pattern known as “rockets and feathers.” Oil producers are now paying far more to insure and move crude out of the Persian Gulf than they did before the war, and those costs flow through to the pump even when the oil itself is available.
Sticky vs. flexible CPI
The split between sticky and flexible prices is the clearest way to see what is really happening underneath the headline.
Flexible CPI, which covers volatile categories like gasoline, airfares and groceries, has surged because of the energy shock. The Atlanta Fed’s flexible-price index was up 4.9% from a year ago in August 2026, down from a 7.0% peak in May but still far above the levels of 2024 and 2025. These prices can spike quickly in response to supply disruptions and can also reverse quickly once conditions normalize.
Sticky CPI, which tracks slow-moving categories like rent, health care, insurance and education, tells a different story. Core sticky prices were up 2.7% in August, the lowest reading since 2021 and down from 3.4% a year earlier. These prices move gradually because they are shaped by long-term contracts, regulated pricing and labor-intensive business models.
The Fed has historically “looked through” temporary energy-driven spikes to focus on the sticky trend. The September hike signals that officials now worry the energy shock has lasted long enough to bleed into sticky categories through higher transportation, shipping and service-sector costs. September’s 0.3% core increase, with airline fares and transportation services both rising, is the kind of evidence they are watching.
What’s actually getting cheaper, and more expensive
The September data shows a mixed picture beneath the headline. Energy dominates, but several everyday categories are flat or falling, which is why grocery bills feel very different from gas bills right now.
Categories with falling or flat prices
| Category | Monthly Change | 12-Month Change |
| Eggs | N/A | -20.6% |
| Used cars and trucks | +0.7% | -1.5% |
| Beef and veal | -1.0% | N/A |
| Food at home (overall) | -0.1% | +1.8% |
| Natural gas (piped) | -0.3% | +5.0% |
| Food (overall) | 0.0% | +2.5% |
| New vehicles | +0.2% | +0.6% |
Categories with the largest price increases
| Category | Monthly Change | 12-Month Change |
| Fuel oil | +15.3% | +74.2% |
| Gasoline (all types) | +9.1% | +34.2% |
| Airline fares | +1.2% | +22.4% |
| Energy (overall) | +5.2% | +20.4% |
| Electricity | +0.2% | +4.4% |
| Food away from home | +0.2% | +3.5% |
| Apparel | +0.3% | +3.4% |
| Shelter | +0.4% | +3.2% |
| Transportation services | +0.6% | +2.7% |
| Medical care | +0.1% | +1.5% |
Source: Bureau of Labor Statistics, CPI September 2026. Monthly changes are seasonally adjusted; 12-month changes are not seasonally adjusted.
Real wages & household impact
Paychecks have stopped outrunning prices. Average hourly earnings rose 0.1% in September to $37.81, and are up 3.0% from a year ago. That is less than inflation, so real average hourly earnings fell 0.5% in the month and are down 0.7% over the past 12 months. Real average weekly earnings, which also reflect hours worked, are down 0.1% from a year ago.
Before the war, workers had been getting ahead. Real weekly earnings rose every month from mid-2023 through February 2026, often by 1% or more. The energy shock erased that cushion in March, and real pay has hovered around zero since.
The squeeze is tightest for lower-income households, who spend a larger share of their income on gasoline, food and utilities. With gas above $4 a gallon for most of the year and diesel surcharges feeding into delivered goods, the households that were already managing higher credit card balances and thin savings are being squeezed further.
Real disposable income
Real disposable personal income per capita was $53,674 in August 2026 (in chained 2017 dollars, at an annual rate), according to the Bureau of Economic Analysis. That is up about 1.1% from a year earlier, a slower pace than the roughly 2% gains households were seeing before the energy shock.
The level is still above the 2022 inflation trough, when real incomes fell as prices outran pay. But the September inflation jump and the September real earnings decline suggest the next readings will be flat at best. Households without savings buffers have the least room to absorb that.
Borrowing costs: mortgage rates back above 7%
Inflation and the Fed’s shift have pushed long-term rates up. Freddie Mac’s average 30-year fixed mortgage rate reached 7.40% in the week of October 8, 2026, up from 6.30% a year earlier and from a low near 6.0% in February. The 10-year Treasury yield, which mortgage rates track, has traded between 5.2% and 5.3% in October.
On a $400,000 loan, the difference between 6.30% and 7.40% is about $294 a month in principal and interest, or more than $3,500 a year. Credit card rates, home equity lines and other variable-rate debt move with the Fed’s target range, so another hike would raise those costs again within a billing cycle or two. If you are weighing an adjustable-rate loan to get around the higher fixed rate, read whether a 6.43% ARM is worth the risk over a 7.40% fixed rate first.
The stagflation question
The combination of accelerating headline inflation, slowing job growth and falling real wages has revived talk of stagflation, the mix of stagnant growth and rising prices that defined the 1970s.
The parallels are uncomfortable. Like the 1973 Arab oil embargo, the Iran conflict is an external supply shock that pushes up energy costs in ways that monetary policy cannot directly address. Unemployment is 4.2%. Payroll growth has slowed to a trickle, with July revised to a loss of 10,000 jobs. Real weekly earnings are negative. And the Fed is now raising rates into that slowdown.
The counterargument is that core inflation at 2.6% is nowhere near 1970s levels, the Fed’s own projections still show inflation falling back toward 2% in 2027, and GDP growth is still projected at 2.3% for 2026. Chair Warsh offered little forward guidance in September beyond saying that inflation remains too high, and the median projection shows only one more hike.
The key variable remains the war. If oil flows normalize and shipping costs fall, the energy component could reverse quickly, as it did in the summer. If fighting escalates and crude returns above $110 a barrel, headline inflation could move back above 4% and force the Fed to choose between its two mandates in a way it has avoided so far.
The government shutdown data gap
One caveat for reading inflation trends through this period: the 43-day government shutdown in fall 2025 disrupted BLS data collection. October 2025 CPI data was never collected, and November’s report relied on incomplete sampling. The charts in this study show a gap for October 2025 rather than an imputed value.
The BLS used a “carry-forward” method to fill the gap in its published index, and economists note this likely imparted a slight downward bias to inflation readings from December 2025 through early 2026. Those effects have now mostly washed out of the 12-month comparisons, but the October 2025 to October 2026 comparison in next month’s report will still be built on an imputed base.
What to watch next
The next few weeks will tell whether September was a second peak or the start of a new climb.
- FOMC meeting, October 27 to 28: Markets expect either a hike now or a strong signal of one in December. The statement language on “geopolitical developments” and the labor market will matter as much as the decision.
- October CPI release, mid-November: Gasoline prices stabilized in early October after rising through September, so the monthly energy contribution should be smaller. Watch core services, where the energy pass-through shows up last.
- October jobs report, early November: After 29,000 jobs in September and downward revisions to July and August, another weak reading would raise the stagflation risk and complicate a December hike.
- Tariff schedule: Yale’s Budget Lab counts several tariff increases scheduled between now and December that would lift the average statutory rate to about 11.8%, adding to goods inflation in early 2027.
- FOMC meeting, December 8 to 9: The last meeting of the year comes with new projections. The current median path implies the target range ends 2026 at 4.00% to 4.25%.
Frequently asked questions
Why did inflation rise again in September?
Gasoline. It rose 9.1% in the month and accounted for more than half of the 0.6% overall increase. Energy as a whole rose 5.2% in September and is up 20.4% from a year ago, as the Iran war continues to keep oil shipping costs high.
Is core inflation still improving?
Mostly, with a wobble. Core CPI rose 0.3% in September and 2.6% year over year, up from 2.4% in August but still well below the 3.0% level of a year ago. The Atlanta Fed’s core sticky-price index, which strips out the most volatile items, is at 2.7%, its lowest since 2021. The risk is that energy costs keep feeding into services like airfares and transportation, which is what happened in September.
Will the Fed raise rates again in 2026?
Probably. The Fed raised its target range to 3.75% to 4.00% in September, its first hike since 2023, and the median projection among officials implies one more quarter-point increase by year-end. After the September CPI report, futures markets priced the odds of another hike by December above 96%, according to CNBC. The remaining meetings are October 27 to 28 and December 8 to 9.
How do tariffs factor in?
Tariffs are the second front. The Budget Lab at Yale estimates the average statutory tariff rate at 11.0% as of August 2026, rising to about 11.8% by December under current law, with a total consumer price effect of about 0.7% and a cost of about $1,100 a year for a typical household. That is smaller than the energy shock, but it is more persistent.
What does the Fed’s projection say about future inflation?
The September 2026 Summary of Economic Projections forecasts PCE inflation of 3.7% for 2026 (up from 3.6% in June), falling to 2.3% in 2027 and 2.1% in 2028. Core PCE is projected at 3.4% for 2026 and 2.5% for 2027. The median federal funds rate projection is 4.1% at the end of both 2026 and 2027.
Are wages keeping up with inflation?
Not right now. Average hourly earnings are up 3.0% from a year ago, less than the 3.7% rise in prices, so real hourly earnings are down 0.7% over 12 months and real weekly earnings are down 0.1%. Before the war, real earnings had been rising for nearly three years.
Could inflation go even higher?
Yes. If the conflict escalates and oil returns above $110 a barrel, headline CPI could move back above 4%, as it did in May. If energy prices stabilize, the monthly energy contribution should shrink and headline inflation should drift back toward core. Either way, the lagged effects of higher fuel costs will keep pushing on transportation, shipping and food prices for months.
Key takeaways
- Headline CPI rose to 3.7% in September 2026, up from 3.4% in August, with gasoline accounting for more than half of the monthly increase.
- Core CPI (excluding food and energy) is 2.6%, still relatively tame but a tenth hotter than expected, as energy costs begin to show up in airfares and other services.
- Energy is up 20.4% from a year ago, gasoline 34.2% and fuel oil 74.2%, eight months after the Iran war began. Moody’s Analytics estimates the war has cost the average household about $2,000.
- The Fed raised rates in September for the first time since 2023, to 3.75% to 4.00%, and markets expect another hike by December.
- Real average weekly earnings are down 0.1% from a year ago, job growth slowed to 29,000 in September and unemployment is 4.2%, reviving stagflation concerns.
- Mortgage rates are back at 7.40%, up from 6.30% a year ago, adding about $294 a month to a $400,000 loan.
Methodology note
This study uses data from the Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U). Monthly changes are seasonally adjusted; 12-month changes are not seasonally adjusted, following BLS convention. Federal funds rate data is from the Federal Reserve Board of Governors. Real earnings data is from the BLS Real Earnings release. Real disposable income data is from the Bureau of Economic Analysis. Sticky and flexible CPI series are from the Federal Reserve Bank of Atlanta. Mortgage rates are from Freddie Mac’s Primary Mortgage Market Survey. Gasoline prices are from the U.S. Energy Information Administration and AAA. Charts omit October 2025, when the BLS did not collect prices. All data is current as of October 14, 2026.
Article sources
- Consumer Price Index, September 2026 – U.S. Bureau of Labor Statistics
- Real Earnings, September 2026 – U.S. Bureau of Labor Statistics
- Employment Situation, September 2026 – U.S. Bureau of Labor Statistics
- FOMC Statement, September 16, 2026 – Federal Reserve Board
- Summary of Economic Projections, September 16, 2026 – Federal Reserve Board
- Federal Funds Target Range – FRED, Federal Reserve Bank of St. Louis
- Sticky-Price CPI – Federal Reserve Bank of Atlanta
- Personal Income and Outlays, August 2026 – Bureau of Economic Analysis
- Primary Mortgage Market Survey – Freddie Mac
- The State of U.S. Tariffs, August 24, 2026 – The Budget Lab at Yale
- National Average Gas Prices – AAA
- CPI inflation report September 2026 – CNBC
- The Iran war is costing American households $2,000 each, Moody’s estimates – CNN
Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.
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