Inflation persisted in August, potentially locking in a Fed interest rate hike — SkimNews
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- U.S. consumer prices rose 0.4% in August, matching forecasts, with the 12-month increase holding at 3.4%, according to the Bureau of Labor Statistics.
- Core CPI, excluding food and energy, increased 0.3% for the month—higher than the 0.2% expected—while its annual rate held steady at 2.4%.
- Gasoline prices jumped 3.9% in August, driving more than a third of the headline gain, as the broader energy index rose 2.1% amid Middle East tensions.
- Shelter costs climbed 0.3% after two months of moderation, while transportation services rose 0.5%, contributing to broad-based inflationary pressure.
- Fed funds futures traders raised the probability of a rate hike to about 90% following the report, up from nearly 70% before the release.
- Chairman Kevin Warsh emphasized that rates can only remain on hold if disinflation continues, a condition the August CPI data did not satisfy, according to Nationwide’s Kathy Bostjancic.
Why it matters: The stronger-than-expected core CPI reading shifts the Fed toward a rate hike next week, increasing borrowing costs for consumers and businesses just as energy prices threaten to reignite broader inflation. With markets now pricing in a 90% chance, the central bank faces mounting pressure to act despite prior hopes for a pause.
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