Inflation Hits 3.7%: Cato Economists on Affordability and Fed Rate Hikes

“Americans were already frustrated by the surge in prices since 2020, and September’s inflation report gives them little reason to feel better. Inflation rose to 3.7 percent, gasoline prices jumped 9.1 percent in September alone, and inflation-adjusted hourly earnings have fallen 0.7 percent over the past year.”

“President Trump promised to bring prices down, but that was never a realistic goal with the Federal Reserve targeting low, positive inflation. Worse, policies like tariffs, mass deportations, and the war in Iran have put further upward pressure on prices. Large budget deficits and political pressure on the Fed to loosen monetary policy risk making inflation even harder to contain.”

“If Washington is serious about affordability, it should stop making the problem worse. That means reining in federal spending and borrowing, removing trade barriers, and easing regulations that restrict construction, labor supply, and competition.”

“The latest CPI reading only goes to show how difficult it is to bring inflation back down once it is entrenched. Barring any improvements in macroeconomic policy making by the administration, this CPI report raises the likelihood of another Fed rate hike at its next FOMC meeting.”