Gasoline Costs Push Inflation Higher

September’s inflation report puts a sharper edge on the fuel-cost problem. Consumer prices rose 0.6% during the month, up from 0.4% in August, the Bureau of Labor Statistics reported on October 14. Annual inflation increased to 3.7% from 3.4%.

Gasoline prices jumped 9.1% on a seasonally adjusted basis and accounted for more than half of the monthly increase. But the pressure was not confined to fuel: prices excluding food and energy rose 0.3%, matching August, while their annual increase reached 2.6% from 2.4%.

Our concern is what higher everyday costs leave behind for businesses and their customers. A company that spends more on transport while customers have less room for discretionary purchases can face pressure from both directions. Passing costs through may protect its margin, but only if customers keep buying. This report measures consumer prices, so it does not establish a particular company’s costs or profit shortfall.

For business development companies in the Fly High universe, which lend to businesses, that distinction matters. Borrowers need enough earnings to pay interest after covering operating costs. If persistent inflation leads to another increase in interest rates, floating-rate loans could bring lenders more interest income as their rates reset. The same reset would increase borrowers’ bills, and a lender’s own financing costs may also rise. Higher contractual interest is welcome only when the borrower can pay it.

The Federal Reserve raised its target rate range to 3.75% to 4% in September, describing inflation as elevated. Today’s figures do not announce another policy move. They do, in our view, make a quick improvement in borrowing costs harder to count on. Refinancing pressure develops when debt matures or rates reset, rather than reaching every company at once.

Mortgage investment companies face a different balance. Short-term borrowing costs can rise faster than income from existing fixed-rate assets. New investments may offer better yields over time, but that does not immediately repair a squeezed margin between investment income and financing expense. Property owners also need rent growth and occupancy to keep pace with costs; a higher consumer shelter index alone does not prove stronger property earnings.

There is some relief in the details: overall food prices were unchanged in September. Fuel prices can also reverse. We would become more comfortable if delivered energy costs eased and coming business results showed profits holding up after interest expense. For now, this is a reason to examine earning power carefully, without assuming a dividend cut from an inflation number.

Sources

• Bureau of Labor Statistics: September 2026 consumer prices, October 14
• Bureau of Labor Statistics: August 2026 consumer prices
• Federal Reserve: September 16 policy statement

This article is general information, not personalized investment advice. Fly High Investing may hold securities discussed in this article.