Gas Prices Fuel Higher Inflation in September

[MUSIC PLAYING] Inflation rose last month, putting pressure on the Fed to raise rates sooner. Plus, the results of a government investigation into a personal issue for President Trump debanking. So this is a thorn in the bank side that kind of keeps getting bigger and bigger. And the banks are pushing for deregulatory changes. And this is something that sort of threatens to upset all of that. And tech stock sold off today, as the AI build out, just keeps getting more expensive. It's Wednesday, October 14. I'm Alex O'Soleff for the Wall Street Journal. This is the PM edition of What's News, the top headlines, and business stories that moved the world today. [MUSIC PLAYING] Inflation picked up last month. Data out from the Labor Department today show that consumer prices rose 3.7% from a year earlier. That's hotter than August gain of 3.4%. And it was higher than economists expected. Journal Economics reporter Conrad Puthier is here to discuss the numbers in more detail. Conrad, what drove inflation higher last month? It's fuel above anything else, right? Gasoline prices shut up, diesel prices are up, heating oil prices are up, and that has been the big driver of inflation. But beyond that, there are categories that aren't really impacted by oil at all that are also going up. And what do we know about that and what's driving that? Despite the labor market that isn't exactly super hot, people have jobs, unemployment is low. Stock prices are up by a ton, so people have money. And that is still part of the inflation story. So if you look at things like recreation services, which includes Netflix streaming subscriptions, that's become more expensive. And it's getting more expensive because consumers are willing and able to pay more for this stuff. So you have this twin pressure. On the one hand, you have the costs of the Iran war being passed on through consumers, through higher oil prices. On the other hand, you have the fact that consumers are able to pay those higher prices, which is basically what makes inflation possible. Well, that's a perfect segue to talk about what this means for the Fed. A lot of investors were betting that the Fed would hold off on raising rates at its next meeting later this month, thanks to signals coming from Fed officials. So how is this high inflation reading changing investor assumptions? This is not a great report for the Fed that indicated before that they were not going to raise rates in the next meeting. Now markets seem to be speculating that this will not be the case that they'll actually raise rates twice this year. And the reason being that this is just a hotter inflation report than had been expected, core inflation, which is inflation not counting food and energy. That also rose by more than people expected. And that's concerning because some economists now think that this report basically tells us that inflation is too high and that the Fed is not doing enough to bring it down, but it needs to do more. That was WSJ economics reporter, Conrad Puzir. Thank you, Conrad. Thanks for having me. Well, as inflation rises and everything gets more expensive, retirees will see more money from social security to help pay for it. The social security administration said today that starting in January, the average monthly check for retirees will increase by 3.6%. That equates to about $900 more on average for the year. This cost of living adjustment or cola comes every year. And the one for 2027 is the highest since 2023. Concerns about rising interest rates worried investors today. All three major indexes fell with the NASDAQ leading the losses and dropping almost 2%. Chip stocks and other tech companies like Oracle, CoreWeave, and AMD were hit hard today with stocks of the most indebted AI companies under the most pressure. Investors are worried that rising interest rates could hurt them disproportionately. However, Apple ticked higher and closed with a market cap above $5 trillion today for the first time on record. Investors also dissected a fresh round of bank earnings. Bank of America's profit disappointed, even excluding a $1.2 billion fine. And its shares tumbled almost 5%. There's a new government report out today looking into businesses who were denied services by some of America's largest financial institutions, a practice called debanking. It's something that President Trump says banks like JP Morgan Chase and Capital One have been doing for a while, including to him. And his claims sparked this investigation. The report from the office of the controller of the currency or the OCC is the result of an investigation over the past year. And it gets into specific examples where banks steered away from companies in politically sensitive areas. Dylan Tokar, who covers financial regulation and government investigations for the journal, joins me now with more. Dylan, what were some of the companies the OCC found had been debanked? So the OCC found that there were two primary drivers of these account closures. One was this concept of a reputational risk where banking particular customers could have a reputational impact on a bank, and then therefore somehow contribute to its financial stability down the line. The other thing that they looked pretty closely at was ESG or environmental social governance policies. And they found that the banks in many cases decided not to bank companies in industries such as coal mining and coal-powered plants, firearms, ammunition manufacturers, the operators or construction companies behind detention facilities, tobacco. And do we see banks choosing not to offer services to companies on one side of the political spectrum more often than another? The OCC's report is most focused on instances where banks allegedly discriminated or cut off the bank accounts of conservative or religious customers, but it did identify in one instance a bank that just didn't want to bank any company that it thought was partisan on both sides of the aisle. So it did offer some examples of instances where organizations that were democratic leaning were affected by these decisions. What do the banks say about this report? They are pretty adamant that they don't discriminate on a political or a religious basis. They do acknowledge that they in some instances do close accounts of certain customers. And when they do that, they often point to anti-money laundering laws or the fact that examiners during past administrations would put pressure on them to steer clear from customers that pose some sort of reputational risk. OK, so now this report is out. What could happen as a consequence? I mean, what could regulators actually do here? Behind all of this has been a legal question. And that is what laws or what rules are banks violating when they close down these accounts. Banks do have wide discretion in who they offer their services to, just like any other company. So the executive order that the White House came out with last year suggested that regulators might in some instances impose fines on banks for doing this. But we have yet to see a clearly stated legal basis for doing so. And this has become a topic that the MAGA platform and Donald Trump has helped to raise the profile of. So this is a thorn in bank side that keeps getting bigger and bigger. And this is something that sort of threatens to upset all of that to some degree. Journal reporter Dylan Tokar, thanks so much for joining us. Thank you. Coming up, Tesla is set to debut. The car that some fans have waited almost a decade for. And it could be one of its last. That story and more after the break. In the Middle East, Iran is ramping up attacks in the straight of four moves to levels not seen since the start of the war. Two Emirati cargo ships have sunk in the past 24 hours. And Pakistan's National Hydrographic Office, which monitors activities in Middle Eastern waters, said this was the first incident like this in months. Two other container ships and a tanker were also attacked yesterday as they crossed the strait. And maritime security firms estimate that about two dozen ships have been hit since the beginning of this month. Iran is expanding its targets to non-oil cargoes as the US military has been successfully shepherding more gulf oil through the strait. And oil producers have a growing ability to evade Iran's attempts to shut down brews. Turning to tech news, Netflix is cutting 6% of its staff or about 1,000 positions, and its biggest round of layoffs since 2022. In an email to employees this morning, Netflix said that most of the cuts would be in its product, tech, legal, and human resources teams. These layoffs come as Netflix is struggling with slowing growth and customer engagement. And it's trying a number of ways to get subscribers to spend more time on its platform. And while its rate of customer defections is the best in the industry, it shares have still fallen more than 40% in the past year. Netflix stocked today closed up 0.2%. And finally, the day some auto fanatics have been waiting for for years has arrived. Tesla's new Roadster is set to debut in Texas tomorrow. Tesla CEO Elon Musk unveiled the Roadster back in November 2017. And since then, the company's been accepting reservations for the car. People who wanted the Roadster have paid at least $50,000, and sometimes much more to get on the wait list. And there's a lot of hide to live up to. As Musk has promised that the sports car could go from 0 to 60 miles per hour in less than 2.3%. seconds, which is faster than Formula One race cars. Tesla originally said production was supposed to start years ago. But as journal autos reported Christopher Outs told our tech news briefing podcast, that didn't happen. Tesla hasn't exactly said precisely why, but what, you know, various people who used to work there and analysts have said is they were focused on other things. For example, the development of the cyber truck and the roadster continually was pushed back. And remember, this was also the COVID period as well. It was supposed to start production in 2020. We know what a chaotic year that was. Tesla hasn't released the final price of the car, but it's likely to be its most expensive model ever. And as Chris says, it comes as the company is leaving the auto business behind. What's interesting here is that Tesla has been de-emphasizing its core auto business for a few years now, pivoting to AI and robotics as the future of the company. The new roadster maybe represents a sort of swan song for Tesla's auto business. To hear more from Chris, listen to tomorrow's episode of tech news briefing. And that's what's news for this Wednesday afternoon. Today's show is produced by Anthony Bansi with supervising producer Tally Arbal. I'm Alex Azula for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.