3 things that are driving inflation higher

By Robert Schroeder

Struggling with elevated prices? You don't have to look much further than your local gas station.

Gasoline was behind more than half of the increase in inflation in September.

To understand why inflation is running hot, take a look at your local gas station - and a couple other places.

Gasoline prices rose an eye-popping 9.1% in September from the prior month, according to the consumer-price index report released Wednesday. That was much faster than the 3.9% increase clocked in August, and it contributed to a whopping 34% increase over the past year.

Read more about September's CPI in our live coverage.

Painfully high gasoline prices (RB00) are nothing new for American consumers, but the story doesn't end there. Call it the spillover effect: As noted by CIBC Economics, transportation services - which is partly linked with higher gasoline prices - posted price growth of 0.6% for the month, an increase from August.

"Notable increases in this category include car and truck rental, airline fare and intracity transportation," said Helen Lao of CIBC.

Don't forget about gasoline's cousin, diesel. Earlier this month, Barclays analysts were warning that elevated diesel prices "are unlikely to remain confined to the energy line-items of U.S. inflation."

"Although most consumers don't purchase diesel directly, it fuels the movement of goods and services across the economy," they wrote. A year ago, diesel was $3.66 a gallon, on average. Now it's about $6.30, according to AAA.

Another key factor in inflation is the rapid pace of construction of data centers for artificial intelligence. This particular month, information technology commodities rose 0.9%, "a reflection of the AI buildout," said Mark Streiber of FHN Financial. And the growth didn't stop there.

"If one is looking for evidence of an AI-caused inflation, look at computer peripherals, which increased by 1.3% in September and by 9.2% from one year ago," Joseph Brusuelas at RSM wrote in a post on Wednesday.

All this is a growing worry for the Federal Reserve, with some officials blaming demand related to the AI build-out for ramping up inflationary pressure.

Inflation tied to the AI boom is "jumping out of its lane" and starting to push up prices in other parts of the economy, Chicago Fed President Austan Goolsbee told Semafor this week.

There's at least one other factor in persistent inflation: President Donald Trump's tariffs.

Without tariffs - one of Trump's signature economic policies - the cost of many everyday consumer goods would have fallen last year, according to a new analysis by the New York Federal Reserve.

"By February 2026, tariffs had contributed 2.9 percentage points to goods price inflation, and without them goods prices would have fallen slightly," New York Fed researchers wrote.

And the latest CPI report shows evidence of Trump's levies pushing up costs.

"A combination of tariffs and transportation costs are now showing up in recreation commodities - though we likely have not seen the full extent of it just yet," said analysts at RBC Economics.

"Both toys and other recreational goods - products that are largely imported - posted their largest-ever monthly changes," the analysts wrote.

-Robert Schroeder

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10-14-26 1250ET