US Consumer Prices Rose 3.4% in August, Fed Rate Hike Odds Jump

Consumer prices in the U.S. rose 3.4% in August, matching July's pace and exceeding economists' forecasts, according to Labor Department data released Friday.

Gasoline costs, up 3.9% for the month and 27.4% year-over-year, accounted for over one-third of the increase. This hotter-than-expected inflation report has increased the likelihood of the Federal Reserve issuing its first interest rate hike in more than three years at its upcoming meeting on September 16. Analysts cited the persistent inflation, which remains well above the Fed's 2% goal, as a key factor.

Core CPI, excluding volatile food and energy, rose 0.3% monthly, an acceleration from July's 0.2% pace, and was up 2.4% annually. Fed Chairman Kevin Warsh has previously stated the central bank will have work to do if inflation does not fade. Following the data release, the probability of a rate hike jumped to approximately 90%, up from 70% the previous day, according to CME FedWatch.

The inflation figures also underscore affordability challenges for voters ahead of the November midterm elections, with President Donald Trump's approval ratings reportedly eroded by high prices for petrol and food. Some economists attribute persistent price pressures to tariffs on imports, while others point to the conflict in the Middle East driving up oil prices. Wholesale prices also rose 0.4% in August, as expected.