In August, headline CPI for all urban consumers rose 0.4% on a seasonally adjusted basis and 3.4% over the prior 12 months on a non-seasonally adjusted basis (1). Core CPI, which excludes food and energy, increased 0.3% for the month and 2.4% year over year (2).
The data suggests higher energy prices in 2026, driven by the war with Iran, is the primary catalyst of rising headline inflation. By comparison, the trailing 12-month headline CPI rate was just 2.4% in January of this year (3).
In response to the latest inflation report, the Fed raised interest rates by 0.25 percentage points on September 16 (4). Unfortunately, rising oil prices act like another tax on consumers, so I’m not sure how raising short-term interest rates delivers the inflation relief many expect. Let me give you a few examples:
Historically, rates associated with mortgages, auto loans, and securities-based lines of credit trend higher when central banks raise interest rates. How does that help the consumer?
Does anyone believe governments will reduce their spending because central banks raised short-term rates? I don’t!
And I haven’t heard one CEO of an energy company say they’ll increase oil production because rates are now going higher.
I also haven’t seen data supporting the idea that the U.S. economy is overheating, which is one of the most compelling reasons to raise interest rates. The U.S. economy grew at an annual rate of 1.5% in Q2, down slightly from 2.1% in Q1 (5). I recognize the Atlanta Fed has a 5.1% GDP forecast for Q3. Prove it first before considering higher interest rates to moderate a potentially blistering economy. (6)
I acknowledge the Fed is in a difficult position with the data it’s working from. That said, I was hopeful this new leadership at the Fed would take a different approach than past Fed boards.
It’s early, but so far, you may consider me a skeptic.
Heading into October, I’m looking forward to my annual fishing trip with some friends. After four years of catching salmon and halibut in Alaska, we’ve decided to change things up. This fall, we’re heading to the warmer waters of Stuart, FL, with the goal of hauling in Sailfish, Blackfin Tuna and Mahi.
Wishing everyone an excellent fall season, and I’ll see you again in late October.
(1) - https://www.bls.gov/news.release/cpi.nr0.htm
(2) - https://www.bls.gov/news.release/cpi.nr0.htm
(3) - https://www.bls.gov/news.release/archives/cpi_02132026.htm
(4) - https://www.cnbc.com/2026/09/16/fed-meeting-today-live-updates.html
(5) - https://www.bea.gov/data/gdp/gross-domestic-product
(6) - https://www.atlantafed.org/research-and-data/data/gdpnow/current-and-past-gdpnow-commentaries