Prices were up 3. 7% from a year earlier, compared with 3. 4% in August and 3. 6% expected. The monthly increase was the largest in five months.
Energy drove much of the increase. Gasoline prices rose 9. 1% in September, accounting for more than half of the monthly CPI gain, while the broader energy index climbed 5.
Underlying inflation also exceeded expectations. Higher prices for recreation, used cars, education, airline fares, medical care and apparel contributed to the monthly core increase.
Bitcoin fell about $1,000 after the release, trading near $82,800 in the initial reaction and later around $81,500. The 10-year Treasury yield initially jumped above 5. 3%, while the two-year yield rose sharply; stock futures also moved lower and gold declined.
Before the data, traders had largely expected the Federal Reserve to hold rates at its Oct. 27-28 meeting and consider another quarter-point increase in December. Market pricing later put the chance of an October hike near 44%, while the odds of two rate increases by the end of the year rose to 44% from 13% a week earlier. Chicago Fed President Austan Goolsbee called the figures discouraging but said policymakers needed more data and should focus on the inflation trend rather than one report.