Afrasianet - U.S. inflation rose more than expected in the 12 months to September, according to official data released ahead of next month's midterm elections.
The annual inflation rate was 3.7 percent, up from 3.4 percent in August.
The increase was driven by higher gasoline prices, following the disruption of energy supplies from the Middle East as a result of the war between the United States and Israel on the one hand, and Iran on the other.
Pressures from the rising cost of living are prominent in election campaigns across the United States.
What is Inflation?
For example, if the price of a bottle of milk was $1 and then it became $1.10 a year later, it would mean that its price increased by 10 percent over that year.
The U.S. Bureau of Labor Statistics measures inflation using the Consumer Price Index, which tracks changes in the prices of hundreds of goods and services people use in their daily lives, from fresh food and gasoline to medical services, to determine the overall inflation rate in the U.S. economy.
The Bureau updates the list of goods and services included in the index, known as the "Basket of Goods and Services", to keep pace with changes in people's spending patterns and habits.
What are the causes of inflation?
There are several factors that may lead to the acceleration of the price rise..
When demand for a commodity exceeds the available quantities, producers may resort to raising its prices. An example of this is the high demand for Lapobo dolls in recent years, and the accompanying rise in resale prices.
Increased incomes of individuals may also lead to higher demand for goods and services, pushing prices higher.
Crude oil, which is used in the production of gasoline and diesel, is a clear example.
Before the outbreak of war between the United States, Israel, and Iran, the price of a barrel of oil was just over $70. But as supplies have dwindled due to the war, prices have jumped rapidly, now exceeding $100 a barrel.
What is the current inflation rate?
The annual inflation rate in the United States reached 3.7 percent in September, exceeding expectations, amid a sharp rise in gasoline prices.
Car fuel prices have jumped 34.2 percent over the past 12 months.
In September alone, it rose by 9.1 percent, responsible for more than half of the increase in inflation, according to the U.S. Bureau of Labor Statistics.
Energy prices overall rose 20.4 percent during the year, with prices for heating fuel, energy services and electricity rising. Home heating fuel alone recorded an increase of 74.2 percent over the same period.
The U.S. Federal Reserve, which is responsible for setting interest rates in the country, will be watching closely whether rising energy costs will be reflected in the prices of other goods and services, such as food, which could push inflation higher, experts said.
So far, the rise in food prices has been limited, with no increase in September, while the year-on-year increase was 2.5 percent.
The core inflation rate, which excludes food and energy prices, was 2.6 percent.
How have Social Security payments been affected?
Shortly after the latest inflation data was released, the U.S. Social Security Administration announced a 3.6 percent increase in benefits it disburses to beneficiaries in 2027, including pensions, heirs' benefits, and disability benefits.
The increase will mean an average pension increase of $75 per month, the administration said.
The planned increase to keep up with the rising cost of living will come into effect in January, benefiting some 72 million people.
The 7.2 million beneficiaries of the Supplementary Security Income program will start receiving the higher payments from December 31.
How have tariffs affected inflation?
Since returning to the White House for a second term, U.S. President Donald Trump has imposed tariffs on most U.S. trading partners around the world.
Although the Supreme Court ruled in February that most of the additional tariffs he imposed on imports from around the world were illegal, Trump was quick to announce a new 10 percent global tariff to replace them.
Trump justified the tariffs by saying they would increase U.S. tax revenues, support the manufacturing sector, and encourage consumers to buy U.S. products.
But a study by the Federal Reserve Bank of New York showed that increased tariffs on imports also contributed to higher inflation.
Tariffs, taxes paid by companies on goods they import, increase costs for U.S. companies, unless foreign suppliers lower their prices to bear part of the increase.
But the Federal Reserve Bank of New York found that companies exporting to the United States had cut their prices only marginally in response to the new tariffs, leaving U.S. companies to bear about 90 percent of their additional cost.
The impact of the tariffs was not limited to imported goods, but also indirectly extended to the prices of locally manufactured products, as many American companies rely on parts and materials they import from abroad.
The bank concluded that every 1 percentage point increase in average tariffs led to a 0.25 percent increase in the prices of consumer goods a year later.
Has inflation reached higher levels in recent years?
Although the current inflation rate exceeds the US Federal Reserve's target of 2 percent, it has already reached much higher levels.
During the pandemic, supply chain disruptions, among other factors, contributed to the acceleration of price rises.
In early 2022, when Russia launched its full-scale invasion of Ukraine, oil prices jumped to more than $100 per barrel.
These two factors contributed to pushing the inflation rate to a peak of nearly 9 percent.
Can inflation come down?
It is important to distinguish between falling inflation and falling prices. Slowing inflation does not necessarily mean that prices are falling, but rather that they are still rising, but at a slower pace.
In fact, a limited amount of inflation is seen as healthy for the economy, which explains why the US Federal Reserve has set an inflation target rate of 2 percent.
Many central banks consider an inflation rate of around 2 percent, or slightly higher, to be a stable level that does not negatively affect consumers' purchasing decisions.
If inflation falls well below this level, consumers may postpone their purchases if they expect prices to continue to fall.
Weak demand, in turn, could prompt companies to cut wages or reduce their workforce.
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