Trump’s War Backfires, Making Life Even Harder for Americans

US inflation heated up again in September, driven by a sharp rise in petrol prices. The situation dealt a blow to President Donald Trump and the Republican Party ahead of the midterm elections on 3 November, while also reviving the prospect of an interest-rate rise by the Federal Reserve later this month.

According to Reuters on Thursday (15 October 2026), the US Labour Department’s Consumer Price Index (CPI) report released on Wednesday showed prices rose 0.6% last month, following a 0.4% increase in August. Year on year, CPI climbed 3.7% in September, up from 3.4% in August.

A 9.1% surge in petrol prices, driven by the US-Israel war with Iran, accounted for more than half of the monthly CPI increase. Other motor fuels, including diesel, jumped 11.9% month on month and 60.9% year on year, reaching a record high.

The report adds to a series of surveys this month pointing to worsening consumer sentiment and a sharp decline in Trump’s approval ratings amid concerns about the cost of living. A Reuters/Ipsos poll found that about 78% of Americans blamed Trump’s policies, including tariffs and the Middle East conflict, for prices rising far faster than wages.

“Much of the inflation we are experiencing now is the result of erratic policies from the executive branch,” said Kyle Moore, chief economist at the Century Foundation.

“Worse still, the aimless war in Iran continues to disrupt global supply chains. The administration is also entirely unwilling to moderate the pace of AI and data-centre construction,” he said.

In the food sector, overall food prices were unchanged after rising 0.1% in both July and August. Grocery prices fell 0.1% month on month as beef prices dropped 1.0%, dairy products 0.9% and eggs 1.3%. However, non-alcoholic beverages rose 0.9%, while fruit and vegetables increased 0.5%; bananas jumped 1.0% and lettuce rebounded 3.9%. Grocery prices were up 1.8% year on year. Meanwhile, average hourly earnings for all employees fell 0.7% in September compared with a year earlier, after declining 0.3% in August.

“Although most of the loss in purchasing power is due to rising energy costs, there is no reason to expect that to fade any time soon,” said Eric Winograd, chief US economist at AllianceBernstein.

“The lower tier of the K-shaped economy is falling further behind, as anyone who has watched campaign adverts on television in recent weeks will have heard.”

As the cost of living continues to surge, the US Social Security Administration announced a 3.6% cost-of-living adjustment for 2027, benefiting nearly 72 million Americans. The average retirement benefit is expected to rise by US$75 (Rp1,342,500) a month.

Core US CPI, which excludes food and energy, rose 0.3% in September, matching August’s increase, and reached 2.6% year on year, up from 2.4%. The core CPI figure was supported by increases in shelter costs (0.4%), owners’ equivalent rent (0.3%) and airfares (1.2%). Consumers also paid more for lawn-care services, recreation, education, hospitals and dental care, pushing overall services prices up 0.4%.

Core goods prices also rose 0.3%, driven by sharp increases in used cars and trucks (0.7%), clothing (0.3%) and toys (4.2%), despite prescription medicines becoming cheaper. Computer and peripheral prices jumped 1.3% amid investment related to artificial intelligence (AI), while computer software prices rebounded 0.4%.

The hotter-than-expected data led financial markets to raise the probability of a Federal Reserve rate increase at its 27–28 October meeting to 37%, from 22% before the CPI release. However, most economists still expect the Fed to hold rates this month and raise them only in December, after increasing rates by 25 basis points to a range of 3.75%–4.00% in September.

Based on the CPI data, economists estimate that core PCE inflation, the measure tied to the Fed’s 2% target, will come in at between 0.3% and 0.4% month on month, or 3.1% year on year.

“What is interesting is that the main drivers of inflation are supply-side policies, which are better addressed by fiscal authorities,” said Joseph Brusuelas, chief economist at RSM.

“But that will not happen any time soon, leaving the Fed to deal with restoring price stability,” Brusuelas concluded.