US Inflation Accelerates in August, Boosting Odds of Fed Rate Hike

U.S. consumer inflation accelerated in August, driven by a sharp rebound in gasoline prices and persistent shelter costs, according to a government report released Friday. The data significantly increased market expectations that the Federal Reserve will raise interest rates at its upcoming policy meeting. The Consumer Price Index (CPI) rose 0.4% in August, up from a 0.1% increase in July, the Bureau of Labor Statistics reported. The annual inflation rate held steady at 3.4%. Core CPI, which excludes volatile food and energy prices, increased 0.3% for the month, exceeding the 0.2% forecast by economists. However, its annual rate slowed to 2.4% from 2.5% in July. Gasoline prices surged 3.9% in August, accounting for more than one-third of the monthly increase in the headline index. Shelter costs, a major component of the CPI, rose 0.3% during the month and are up 3.0% year-over-year. The report also noted that food prices were relatively stable, with the food-at-home index increasing 0.1% for the month. The hotter-than-expected core inflation reading immediately shifted market expectations for the Federal Reserve's September 15-16 meeting.