Consumer prices rose 3.7% in September from a year earlier, the government reported Wednesday, marking the hottest annual inflation reading in more than a year and coming in above the 3.6% rate economists had forecast. The Bureau of Labor Statistics said prices climbed 0.6% from August to September alone — the largest one-month jump in five months.

The culprit was unmistakable: gasoline. Pump prices rose 9.1% in September and are now up 34.2% from a year ago, the BLS said, accounting for more than half of the entire monthly increase in the all-items index. Fuel oil prices have surged an even steeper 74.2% over the past twelve months. The energy spike has tracked a months-long climb in crude prices, with Brent crude trading above $105 a barrel in recent weeks amid heightened tension in the Middle East.

Core inflation, which strips out volatile food and energy costs and is watched closely by the Federal Reserve as a gauge of underlying price pressure, also ran hotter than expected: up 2.6% year-over-year and 0.3% for the month, both above consensus. Shelter costs, the biggest single component of the index, accelerated to a 3.2% annual pace. Food inflation offered a rare bright spot, easing to 2.5% from 2.7% the month before.

A headache for the Fed

The report lands two weeks before the Federal Reserve's next policy meeting, scheduled for October 27-28, and sharpens a dilemma for policymakers who have spent much of the year weighing persistent inflation against signs of a cooling labor market. Economists had been hoping September's reading would support the case for easing; instead, it adds fuel to arguments from more hawkish officials that rates may need to stay restrictive — or even rise further — to bring inflation back toward the Fed's 2% target. Gasoline did most of the damage this month, but the hotter core reading is the part that is drawing the most attention from Fed watchers, since it strips out the volatile energy swings policymakers usually look past.

Bond markets had already been bracing for an uncomfortable print. The 10-year Treasury yield has been climbing toward levels not seen since 2002 in recent sessions, reflecting investor anxiety that an energy-driven inflation shock could prove more durable than policymakers initially assumed. A hotter-than-forecast CPI reading tends to reduce the market-implied odds of near-term rate cuts, and traders will be parsing Fed commentary in the coming days for signals on how the September data will factor into the October decision.

For households, the report translates directly into higher costs at the pump and, with winter approaching, on home heating bills tied to fuel oil and natural gas. Economists note that food and shelter — the two categories that hit family budgets hardest over time — sent a mixed signal this month, with shelter inflation worsening even as grocery costs eased slightly.

The next major test comes with the October CPI report, due in mid-November, which will show whether September's energy-driven spike was a one-month aberration or the start of a more persistent trend heading into the Fed's final two meetings of the year.