• White House economic adviser Kevin Hassett acknowledged that September's headline inflation was disappointing, with consumer prices rising 0.6% month over month and 3.7% year over year.
  • The increase was driven largely by a 9.1% surge in gasoline prices, but core inflation also exceeded forecasts, indicating broader price pressures.
  • Markets reacted negatively, with stock futures turning lower and bond yields rising, though Fed rate expectations remain largely unchanged for now.

Hassett: 'Top Line Inflation Number Was Disappointing'

White House economic adviser Kevin Hassett said Thursday that the September consumer price index report was "disappointing," as inflation accelerated more than expected. The Bureau of Labor Statistics reported that headline CPI rose 0.6% in September from the prior month and 3.7% from a year earlier, up from 3.4% annual pace in August. The monthly increase matched the Dow Jones consensus, but the annual rate topped the 3.6% forecast.

Core inflation, which excludes volatile food and energy costs, also came in hotter than anticipated. Core CPI rose 0.3% month over month, unchanged from August, but above the 0.2% forecast. On an annual basis, core inflation climbed to 2.6% from 2.4%, exceeding the 2.5% estimate. The data suggest that price pressures are not solely confined to energy.

Gasoline and Shelter Drive Gains

Gasoline prices were a major contributor, surging 9.1% for the month and 34.2% over the year. Energy prices overall rose 5.2%. But shelter costs, which account for a large share of the index, increased 0.4%, while used cars and trucks rose 0.7% and airline fares jumped 1.2%. Food prices offered some relief, with overall food costs unchanged and grocery prices dipping 0.1%.

The ongoing U.S.-Iran conflict, which began with U.S. and Israeli strikes in late February, has been linked to the energy surge. However, the BLS release does not attribute the price increases to any specific cause.

Financial markets reacted swiftly. Stock-index futures turned negative and Treasury yields rose sharply following the release. Yet federal-funds futures pricing showed little immediate change, suggesting investors are not yet pricing in a different path for interest rates. The Federal Reserve raised rates by a quarter point in September to a target range of 3.75%–4%, and market expectations currently favor no hike in October but another increase in December.

Core Inflation a Concern for Policymakers

The uptick in core inflation complicates the Fed's decision-making. The central bank's formal 2% inflation target is based on the PCE price index, not CPI, and September PCE data are due later this month. Still, the persistence of core price pressures, alongside rising shelter and transportation costs, makes it harder for officials to dismiss the inflation spike as purely temporary.

"The top line number was disappointing," Hassett said, according to people familiar with his remarks. His comment contrasts with his recent optimistic tone. On October 2, he defended President Trump's supply-side policies and pointed to low three-month inflation averages and declining food and energy prices. Those short-term measures, however, are not directly comparable to the annual figures released Thursday.

The September CPI report follows an uneven inflation path in 2026: monthly headline CPI rose 0.9% in March, fell 0.4% in June, then accelerated from 0.1% in July to 0.4% in August and 0.6% in September. The September Fed hike was its first in more than three years.

Internationally, Spain also reported higher inflation on Thursday, with annual CPI rising to 4.9% from 4.3% and core inflation increasing to 3.1%. The parallel suggests that inflationary pressures are not isolated to the U.S., though the causes may differ.

Looking ahead, attention shifts to the September PCE report and the Fed's next policy meeting. Several policymakers have indicated no rush to raise rates again, but most expect another hike this year, and market pricing implies at least two more increases in 2027. The next CPI release is scheduled for November 10, 2026.

This is a developing story. Updated through information available at approximately 9:25 a.m. EDT on October 14, 2026.