US inflation rose 3.7% in September, more than economists expected and still well above the Federal Reserve’s 2% target, as the central bank weighs whether to hike interest rates again by year’s end.
The reading for the Consumer Price Index a closely watched measure of inflation that tracks changes in the costs of everyday goods and services matches the reading in August, and is slightly above the 3.6% advance that economists expected, according to data by the Bureau of Labor Statistics released Thursday.
On a monthly basis, inflation slowed to 0.4% from 0.6% in August, partly because of lower pressure from energy prices.
However, core CPI a number that excludes volatile food and energy prices and serves as a closely watched gauge among policymakers for long-term trends held steady at 0.3% month to month and rose 4.1% from a year ago, in line with expectations.
Though September’s CPI is also a cooldown from inflation’s 9.1% peak in June 2022, it still remains well above the Fed’s 2% goal. Stock futures dropped ahead of the market opening as traders increased their bets of another rate hike to around 50%, up from 30% earlier this week.
“The bigger picture is that the trend is still quite encouraging, but the fight continues,” said Olu Sonola, head of US regional economics at Fitch Ratings in New York. “They [Fed officials] may now want to extend the pause to December, given the recent increase in long-term rates.”
The gasoline index’s 2.1% advance was also a large contributor to the CPI, the data showed, though the federal agency said shelter’s 0.2% increase accounted for over half of the increase.
Gasoline experienced an eye-watering 10.6% increase last month, when AAA figures showed that the average price for a gallon of gas was $3.85.
As of Thursday, a gallon of gas in the US averages $3.65, according to AAA.
While many investors had been willing to look past the volatile energy numbers, a surprisingly resilient labor market has some worried that inflation could be more stubborn.
September’s employment report revealed that the US economy added a whopping 336,000 jobs last month — an unexpected surge that contradicts the notion the Fed may tamp down its aggressive tightening regime.
The blowout number was nearly double the 170,000 jobs economists had expected, and also sharply higher than an upwardly revised 227,000 jobs added in August, according to fresh data released by the Bureau of Labor Statistics last week.
The news sent yields on US Treasury bonds to their highest levels in 16 years and sent the Dow Jones Industrial Average into the red for 2023.
Since inflation hit a four-decade peak last summer, the central bank has worked to bring the stubborn figure down by hiking rates another 25 basis points to a 22-year high in August in hopes of an economic slowdown.
The benchmark federal funds rate currently sits between 5.25% and 5.5%. Last month, Fed officials unanimously decided to hold the record-high rate steady for the second time in six policy meetings so far this year.
But thanks to a strong labor market, the US economy has avoided a downturn, and even the Fed has said its no longer predicting the economy will slip into a recession by the end of the year.
“We must wait for more data to see if this is just a blip or if there is something more fundamental driving the increase such as higher rent increases in larger cities offsetting softer increases in smaller cities,” said US Bank of America Securities economist Stephen Juneau.
“When deciding whether to raise rates one last time this year, the FOMC will be asking whether inflation needs another nudge or if its getting to 2% on its own. Its increasingly looking like the latter,” NerdWallet data analyst Elizabeth Renter told The Post.
“The Fed, astheyreall too happy to remind us, is laser focused on getting inflation down to 2%.”
Fed Chair Jerome Powell has said central bankers will be taking a data-dependent approach moving forward, leaving more interest rate hikes before years end up in the air.
Markets were spooked ahead of the jobs report, falling more than 1% when the Labor Department released its Job Openings and Labor Turnover Summary, which showed job openings increased to 9.61 million in August up from 8.9 million in July.
Steve Witkoff, the US special envoy to the Middle East, has claimed the UK played a “vital role” in helping negotiate the Gaza peace deal, smoothing over a potential diplomatic row between London and Washington.
Witkoff took to X on Monday, ahead of meeting President Donald Trump in Israel, to praise the UK.
“I would like to acknowledge the vital role of the United Kingdom in assisting and coordinating efforts that have led us to this historic day in Israel,” Witkoff wrote.
“In particular, I want to recognise the incredible input and tireless efforts of National Security Advisor Jonathan Powell.”
His comments came 24 hours after education secretary Bridget Phillipson was branded “delusional” by Mike Huckabee, the US ambassador to Israel, for claiming that Sir Keir Starmer’s presence at a signing ceremony for today’s ceasefire deal in Egypt “demonstrates the key role that we [Britain] have played”.
Phillipson added: “We have played a key role behind the scenes in shaping this.
“It’s right that we do so because it’s in all of our interest, including our own national interest, that we move to a lasting peace in the region.
“These are complex matters of diplomacy that we are involved in. But we do welcome and recognise the critical role that the American government played in moving us to this point.”
Her comments prompted Mr Huckabee to repost the Sky News clip on social media, claiming: “I assure you she’s delusional.”
He added: “She can thank Donald Trump anytime just to set the record straight.”
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Mr Huckabee was part of the negotiating team for the peace deal, with Mr Trump calling the former Arkansas governor “AMAZING” as he said he “worked so hard, and did so much, to bring about peace in the Middle East”.
In August, Mr Huckabee said the UK and other European nations that said they would declare a Palestinian state were “having the counterproductive effect that they probably think that they want”.
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Israel’s deputy foreign affairs minister, Sharren Haskell backed Huckabee, telling Sky News the UK played “the opposite” of a key role in the peace deal after recognising the Palestinian state.
“The message that the UK government has sent Hamas was the message that: the longer they continue this war, they will be rewarded.
“I mean, you must understand that when a terrorist organisation is thanking you. You are on the wrong side of history.”
It is understood the prime minister has underlined Mr Trump’s key role in securing this deal throughout the process. Publicly, he praised Mr Trump twice in his press conference in India on Thursday.
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2:59
Final preparations for hostages in Israeli hospital
Ms Phillipson stood by the September decision to declare a Palestinian state, saying it was “the right thing to do”.
Husam Zomlot, the Palestinian ambassador to the UK, told Sky News it was a “moment of leadership” for the UK to declare a Palestinian state, and a “responsibility to begin to correct a century of the gravest historic injustices committed against our people”.
He added: “That moment three weeks ago, when the UK did recognise, is a moment when we can say that the wheels of history are turning in a different direction.”
No plans for British troops on the ground
The education secretary also told Sky News the government has “no plans” to put British troops into Israel or Gaza as part of a stabilisation force after the ceasefire.
The US military will help establish a multinational force in Israel, known as a civil-military coordination centre, which is likely to include troops from Egypt, Qatar, Turkey and the UAE.
Image: Tens of thousands of Palestinians have walked back to Khan Younis in southern Gaza. Pic: AP
On Friday, US officials said up to 200 US troops already based in the Middle East will be moved to Israel to help monitor the ceasefire in Gaza.
The day before, President Trump announced Israel and Hamas had “signed off on the first phase” of a peace plan he unveiled last week.
Image: Pic: Reuters
Aid trucks have been gathering in Egypt to cross into Gaza after months of warnings by aid groups of famine in parts of the territory.
In Israel, the remaining hostages are due to be returned from Gaza by Hamas on Monday under the first phase of the peace plan. Twenty are believed to still be alive, 26 have been declared dead, while the fate of two is unknown.
The ceasefire agreement has been made two years after Hamas stormed Israel on 7 October 2023, killing 1,200 people and taking 251 hostages.
Israel’s military offensive has killed more than 67,000 Palestinians in Gaza, according to the Hamas-run health ministry, which the UN deems reliable.
For two years, they have gathered in Hostages Square – parents, brothers, sisters, extended family and friends clutching photographs and signs reading “bring them home”.
They have campaigned, protested and prayed for the return of loved ones taken in the 7 October attacks.
But now the mood has shifted.
The chants of frustration have turned into songs of celebration.
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2:12
Sky’s Alex Rossi reports from Hostages Square in Tel Aviv, where thousands gathered to witness the return of all living Israeli captives.
The tears that once fell in despair are now tears of relief.
The square, normally a site of weekly demonstrations, has transformed into a sea of flags.
Image: Crowds gather in Hostages Square in Tel Aviv. Pic: AP
We watched as tens of thousands packed into this area of Tel Aviv to witness a moment many feared might never come – the homecoming of the remaining hostages.
Every few minutes, the massive video screens behind the stage beamed new images – exhausted but smiling hostages embracing their families.
Each clip is met with a roar of applause – the atmosphere is one of sheer elation, it is electric.
When helicopters pass overhead, ferrying freed captives to nearby hospitals, the crowd erupts again and again, looking upwards to the sky in awe at the impossible that’s now been made possible.
Image: Pic: Reuters
The sense of catharsis here is palpable – at last some closure after a nightmare two years and a chance for the healing process of a nation to begin.
But beneath the jubilation, there’s a deep well of sorrow – and reckoning.
The 7 October massacre was the deadliest single-day attack on Israel since the nation’s founding in 1948 – an event that upended the country’s sense of safety and unity.
More than 1,000 were killed that day, and hundreds were taken into Gaza.
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29:41
‘Israel is committed to peace’
For the families who never stopped fighting for their return, this is both an ending and a beginning.
Now that the living hostages are home, attention turns to those who did not survive.
Officials say the process of identifying and repatriating remains will take time – and for some families, closure still remains heartbreakingly out of reach.
But the questions that linger extend far beyond grief.
Image: Thousands of people celebrate the release of the hostages. Pic: AP
In the days and weeks ahead, the Israeli government faces intense scrutiny.
How could the country’s fabled intelligence and defence apparatus fail so catastrophically?
And what accountability, if any, will fall on Prime Minister Benjamin Netanyahu, who has faced mounting criticism over both the failures leading up to the attack and the protracted efforts to secure the hostages’ release?
This is a nation rejoicing, but also searching for answers.
For now, though, the families in this square are holding tight to one immutable positive – after more than two long years, the living hostages, at least, are finally home.
Drones have been a common sight in Gaza for a long time, but they have always been military.
The whine of a drone is enough to trigger fear in many within the enclave.
But now, drones are delivering something different – long, lingering footage of the devastation that has been wreaked on Gaza. And the images are quite staggering.
Whole city blocks reduced to rubble. Streets destroyed. Towns where the landscape has been wholly redesigned.
Image: Whole city blocks reduced to rubble
Decapitated tower blocks and whole areas turned into black and white photographs, where there is no colour but only a palette of greys – from the dark hues of scorched walls to the lightest grey of the dust that floats through the air.
And everywhere, the indistinct dull grey of rubble – the debris of things that are no longer there.
Image: Gaza is full of people returning to their homes
The joy that met the ceasefire has now changed into degrees of anxiety and shock.
Gaza is full of people who are returning to their homes and hoping for good news. For a lucky few, fortune is kind, but for most, the news is bad.
Umm Firas has been displaced from her home in Khan Younis for the past five months. She returned today to the district she knew so well. And what she found was nothing.
Image: Umm Firas returned to find nothing
“This morning we returned to our land, to see our homes, the neighbourhoods where we once lived,” she says.
“But we found no trace of any houses, no streets, no neighbourhoods, no trees. Even the crops, even the trees – all of them had been bulldozed. The entire area has been destroyed.
“There used to be more than 1,750 houses in the block where we lived, but now not a single one remains standing. Every neighbourhood is destroyed, every home is destroyed, every school is destroyed, every tree is destroyed. The area is unliveable.
“There’s no infrastructure, no place where we can even set up a tent to sit in. Our area, in downtown Khan Younis used to be densely populated. Our homes were built right next to each other. Now there is literally nowhere to go.
“Where can we go? We can’t even find an empty spot to pitch our tent over the ruins of our own homes. So we are going to have to stay homeless and displaced.”
It is a story that comes up again and again. One man says that he cannot even reach his house because it is still too near the Israeli military officers stationed in the area.
Another, an older man whose bright pink glasses obscure weary eyes, says there is “nothing left” of his home “so we are leaving it to God”.
“I’m glad we survived and are in good health,” he says, “and now we can return there even if it means we need to eat sand!”
Image: A man says there is ‘nothing left’
Image: A bulldozer moves rubble
The bulldozers have already started work across the strip, trying to clear roads and allow access. Debris is being piled into huge piles, but this is a tiny sticking plaster on a huge wound.
The more you see of Gaza, the more impossible the task seems of rebuilding this place. The devastation is so utterly overwhelming.
Bodies are being found in the rubble while towns are full of buildings that have been so badly damaged they will have to be pulled down.
Humanitarian aid is needed urgently, but, for the moment, the entry points remain closed. Charities are pleading for access.
It is, of course, better for people to live without war than with it. Peace in Gaza gifts the ability to sleep a little better and worry a little less. But when people do wake up, what they see is an apocalyptic landscape of catastrophic destruction.