Gas Prices Fuel Higher Inflation in September

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Alex Ossola (0:33)

Inflation rose last month, putting pressure on the Fed to raise rates sooner. Plus, the results of a government investigation into a personal issue for President Trump, debanking.

Dylan Tokar (0:44)

So, this is a thorn in the bank side that kind of keeps getting bigger and bigger, and the banks are pushing for deregulatory changes, and this is something that sort of threatens to upset all of that.

Alex Ossola (0:58)

And tech stocks sold off today as the AI buildout just keeps getting more expensive. It's Wednesday, October 14th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that moved the world today.

Inflation picked up last month. Data out from the Labor Department today showed that consumer prices rose 3.7% from a year earlier. That's hotter than August gain of 3.4% and it was higher than economists expected. Journal Economics reporter Konrad Putzier is here to discuss the numbers in more detail.

Konrad, what drove inflation higher last month?

Konrad Putzier (1:36)

It's fuel above anything else, right? Gasoline prices shot up, diesel prices are up, heating oil prices are up, and that has been the big driver of inflation. But beyond that, there are categories that aren't really impacted by oil at all that are also going up.

Alex Ossola (1:49)

And what do we know about that and what's driving that?

Konrad Putzier (1:52)

Despite the labor market that isn't exactly super hot, people have jobs, unemployment is low, stock prices are up by a ton, so people have money, and that is still part of the inflation story. So if you look at things like recreation services, which includes Netflix streaming subscriptions, that's become more expensive, and it's getting more expensive because consumers are willing and able to pay more for this stuff. So you have this twin pressure. On the one hand, you have the cost of the Iran war being passed on through consumers, through higher oil prices. On the other hand, you have the fact that consumers are able to pay those higher prices, which is basically what makes inflation possible.

Alex Ossola (2:28)

Well, that's a perfect segue to talk about what this means for the Fed. A lot of investors were betting that the Fed would hold off on raising rates at its next meeting later this month, thanks to signals coming from Fed officials. So how is this high inflation reading changing investor assumptions?

Konrad Putzier (2:43)

This is not a great report for the Fed. They'd indicated before that they were not going to raise rates in the next meeting. Now markets seem to be speculating that this will not be the case that they'll actually raise rates twice this year. And the reason being that this is just a hotter inflation report than had been expected.

Core inflation, which is inflation not counting food and energy, that also rose by more than people expected. And that's concerning because some economists now think that this report basically tells us that inflation is too high and that the Fed is not doing enough to bring it down and that it needs to do more.

Alex Ossola (3:16)

That was WSJ Economics reporter Konrad Putzier. Thank you, Konrad.

Konrad Putzier (3:19)

Thanks for having me.

Alex Ossola (3:20)

Well, as inflation rises and everything gets more expensive, retirees will see more money from Social Security to help pay for it. The Social Security Administration said today that starting in January, the average monthly check for retirees will increase by 3.6 percent. That equates to about $900 more on average for the year.

This cost of living adjustment or COLA comes every year. The one for 2027 is the highest since 2023

Concerns about rising interest rates worried investors today. All three major indexes fell, with the NASDAQ leading the losses and dropping almost 2 percent. Chip stocks and other tech companies like Oracle, CoreWeave, and AMD were hit hard today with stocks of the most indebted AI companies under the most pressure. Investors are worried that rising interest rates could hurt them disproportionately. However, Apple ticked higher and closed with a market cap above $5 trillion today for the first time on record. Investors also dissected a fresh round of bank earnings. Bank of America's profit disappointed, even excluding a $1.2 billion fine, and its shares tumbled almost 5 percent.