Don’t blame energy prices for this general rise.
Inflation data for October are out, as measured by the Consumer Price Index (CPI), and they are once again not good. Average prices rose by 0.4 percent in a single month — which would be 4.9 percent if annualized for a yearly pace — and by 3.8 percent over the past eleven months. (Because of a government shutdown, the CPI is only available for last November, not October. Since last September, the CPI has risen by 4.1 percent.)
Inflation has picked up since the war in Iran began. Yet fuel prices are no longer the chief driver. According to the Washington Post, “Excluding volatile food and energy increases, core inflation was about the same high pace as the prior two months,” at 0.3 percent (or 3.7 percent annualized).
Examining the moderate effect of fuel prices:
The gasoline index continued its upward climb but at a less-steep rate. The cooling trend may continue, as gas prices fell Tuesday to below $4 a gallon for the first time since July. In October the monthly increase was just 1 percent from the month before, compared with 9.1 percent in September.
Meanwhile, at the grocery store:
Food prices, which have been higher but stable in recent months, grew by the most since April.
Beef, dairy, and fruits and vegetables saw the largest price hikes due to higher diesel costs that have burdened farmers. Weather events related to El Niño storms, as well as immigration enforcement, could also be contributing to the surge in sticker prices at the grocery store, experts say.
Butter, lettuce, seafood, uncooked poultry and beef, and baby food and formula saw sharp price increases between September and October. The cost of sweet rolls, coffee cakes and doughnuts also jumped.
Looking at the CPI over the past four years since 2022, the period when inflation has fallen below its 2021 and 2022 highs but remains persistently elevated, we can see the impact of the Iran war pretty clearly:
A look at CPI inflation over the past seven years: pic.twitter.com/IoxF2zBprB
— John R. Puri (@JohnPuri2026) November 10, 2026
See that little blip upward around May 2026, followed by a reversion to the trendline? That’s most of the war’s effect on inflation: a temporary increase in one particular area, eventually balanced out by less consumer spending and, therefore, slightly lower prices elsewhere in the economy. If gas prices are no longer actively rising, no matter their current price, they are not contributing to month-over-month inflation. The reason the overall price level is rising is that other prices are going up.
The cost of fuel is built into so many goods and services, however, so couldn’t an increase in gas and diesel prices raise the price of everything else? Such thinking follows with the old theory of cost-push inflation, and particularly wage-push inflation, that the higher cost of a universal production factor can “push” up economy-wide prices. The problem with this theory is that, absent a greater availability of money, all U.S. consumers cannot simultaneously spend more on all goods and services, on average, to support higher prices of everything. An energy shock on its own should change relative prices to shift consumption from more fuel-intensive to less fuel-intensive products, reflecting a shortfall of a particular commodity. It should not boost all prices, across the board.
Therefore, when investigating the true cause of general inflation, we might look to the money supply growing by 5.7 percent in a year against real economic growth of just 3.4 percent.