AT&T and T-Mobile rate hikes come back to bite them
The Fed apparently increased interest rates for the first time in three years because of carriers.
This means more expensive financing. | Image by PhoneArena
Last week, the Federal Reserve bumped interest rates by a quarter percentage point, marking its first hike in three years. Your phone bill was partly responsible. While AT&T, T-Mobile, and Verizon all raised prices this year, a Bloomberg report points to the first two as the primary drivers behind the spike.
The core Consumer Price Index (CPI), which excludes volatile food and energy costs, rose 0.3% in August from a month earlier. CPI measures the average change over time in the prices paid by consumers for goods and services.
A historic 5.9% jump in wireless plan rates contributed nearly a 10th of a percentage point all by itself. This was the single largest monthly spike in thirty years.
Economists from Bank of America, Barclays, and Pantheon Macroeconomics singled out AT&T and T-Mobile as the main culprits.
Without that telecom price surge, the reading would have been a milder 0.2%, in line with expectations.
Wireless rates bump up CPI
The core Consumer Price Index (CPI), which excludes volatile food and energy costs, rose 0.3% in August from a month earlier. CPI measures the average change over time in the prices paid by consumers for goods and services.
Economists from Bank of America, Barclays, and Pantheon Macroeconomics singled out AT&T and T-Mobile as the main culprits.
Without that telecom price surge, the reading would have been a milder 0.2%, in line with expectations.
While it is true that the wireless index added 10bps to the core CPI today, and that the core ex-wireless would have been 0.20%, I don’t think the Fed will have the luxury of slicing and dicing the data at the meeting next week.
Omair Sharif, president of Inflation Insights, September 2026
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All postpaid companies raised prices recently
In August, AT&T raised rates on select legacy plans by up to $20 per month. T-Mobile notified customers in July that it was moving them from their grandfathered plans to a modern plan, tacking on an extra $6 per month.
Before that, Verizon raised prices on the Unlimited Ultimate plan by $5 for new customers.
Even though the rate increases were one-time changes, they were substantial enough to make August inflation hotter than it otherwise would have been.
Following the Fed's announcement, T-Mobile's stock price tumbled 7.8% to a 52-week low, Verizon slipped 5%, and AT&T dropped 2.5%, Brian Newman, CEO of AI-Driven Consulting, noted.
Carriers raised prices to finance network modernization and AI infrastructure. However, higher interest rates mean borrowing the capital needed to fund a network buildout will be more expensive.
This is what happened in the early 2000s, when providers who relied on cheap financing were hit the hardest when rates changed.
The central bank is expected to increase rates by another quarter-point in October. The companies carrying the most debt are going to feel it the most.
It might be time for carriers to step back and ask whether unsustainable price increases and borrowing are actually going to pay off.
In August, AT&T raised rates on select legacy plans by up to $20 per month. T-Mobile notified customers in July that it was moving them from their grandfathered plans to a modern plan, tacking on an extra $6 per month.
Before that, Verizon raised prices on the Unlimited Ultimate plan by $5 for new customers.
Catch-22
Following the Fed's announcement, T-Mobile's stock price tumbled 7.8% to a 52-week low, Verizon slipped 5%, and AT&T dropped 2.5%, Brian Newman, CEO of AI-Driven Consulting, noted.
Carriers raised prices to finance network modernization and AI infrastructure. However, higher interest rates mean borrowing the capital needed to fund a network buildout will be more expensive.
This is what happened in the early 2000s, when providers who relied on cheap financing were hit the hardest when rates changed.
What happens now?
The central bank is expected to increase rates by another quarter-point in October. The companies carrying the most debt are going to feel it the most.
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