Key facts
- US consumer prices rose 0.4% in August, up from 0.1% in July.
- Annual inflation advanced 3.4% in August, matching July's pace.
- Core CPI increased 0.3% last month, up from 0.2% in July.
- Year-on-year core CPI rose 2.4% in August, down from 2.5% in July.
- Rising gasoline costs drove the acceleration in consumer prices.
- Market odds for a Federal Reserve rate hike at the next meeting increased to 82%.
U.S. consumer prices accelerated in August, with the Consumer Price Index (CPI) increasing 0.4% from the previous month after a 0.1% rise in July, the Labor Department's Bureau of Labor Statistics reported Friday. Annually, consumer inflation advanced 3.4% in August, matching the pace seen in July. Economists polled by Reuters had forecast the CPI increasing 0.4% over the month and climbing 3.4% year-on-year.
The rise in prices was driven by a rebound in gasoline costs after two consecutive monthly declines. Excluding volatile food and energy components, the core CPI rose 0.3% last month, compared with an expected 0.2% increase. Year-on-year, core inflation increased 2.4% in August, a slight decrease from 2.5% in July.
The Federal Reserve, which targets a 2% inflation rate, may be prompted to raise interest rates at its upcoming meeting due to the persistent inflation. Market odds on a rate increase at the Fed's meeting next week rose to 82% after earlier touching 90%, up from 68% before the report.
Brian Jacobsen, chief economist at Annex Wealth Management, noted that core inflation's monthly increase from 0% in June to 0.3% in August indicates a trajectory the Fed does not want. Joe Saluzzi, partner at Themis Trading, described the numbers as stubborn and in line, suggesting no change is coming and that the Fed might look at different metrics to judge inflation. Robert Pavlik, senior portfolio manager at Dakota Wealth, expects a rate hike next week, arguing that 25 basis points will not solve the inflation problem related to oil supply and will only scare the market further.