Key facts
- US inflation was unchanged at 3.4% in the year to August.
- Gasoline prices rose 3.9% in August, accounting for over a third of overall inflation.
- The average price for a gallon of diesel reached a record high of over $6 on Friday.
- Real average hourly earnings decreased by 0.3% over the past year.
- Interest rates have been held between 3.5% and 3.75% for five consecutive meetings.
US inflation remained unchanged at 3.4% in the year to August, according to data from the Bureau of Labor Statistics. The cost of living has been significantly impacted by rising fuel prices, with gasoline increasing by 3.9% last month alone and contributing over a third of the overall inflation. Diesel prices hit a new all-time high, averaging over $6 a gallon on Friday.
The surge in fuel costs is attributed to higher global oil prices, exacerbated by supply disruptions linked to the US-Iran conflict, which has kept benchmark Brent crude above $100 a barrel. Increased transportation costs due to higher oil prices are also expected to filter through to consumer goods.
Separate figures revealed that real average hourly earnings have fallen by 0.3% over the past year, indicating that wages are not keeping pace with the rising cost of living. These economic conditions, coupled with comments from President Donald Trump suggesting oil prices will remain high until the war with Iran ends, have intensified expectations that the Federal Reserve will increase interest rates at its upcoming meeting. Fed chair Kevin Warsh's remarks emphasizing the need to slow price rises have further fueled these expectations. The Federal Reserve has maintained its target interest rate between 3.5% and 3.75% for the past five meetings.