US consumer inflation picked up in August, with prices rising 0.4% over the month as petrol costs rebounded, adding to expectations that the Federal Reserve could raise interest rates at its meeting next week.
The Consumer Price Index increased from a 0.1% rise in July, while annual inflation held at 3.4%, according to the Bureau of Labor Statistics. The figures were in line with economists’ forecasts.
Core inflation, which excludes volatile food and energy costs, rose 0.3% during August, up from 0.2% the previous month. On an annual basis, core CPI eased to 2.4% from 2.5% in July.
Petrol prices were the biggest contributor to the monthly increase, climbing 3.9% after falling in each of the previous two months. Energy prices overall rose 2.1%, while shelter costs increased 0.3%.
Food prices edged up 0.1% over the month, with the cost of eating out rising 0.3%. Over the past year, energy prices have increased by 16.3%, while food prices are 2.7% higher.
US inflation puts focus on Federal Reserve decision
The report comes after a stronger-than-expected rise in producer prices and a robust employment report, reinforcing concerns that price pressures may not be cooling quickly enough.
Financial markets had been pricing in roughly a 70% chance of a quarter-point rate increase at the Federal Reserve’s 15 and 16 September meeting. The central bank’s benchmark interest rate is currently in a range of 3.50% to 3.75%.
The figures also present a challenge for President Donald Trump, who has been pressing the Federal Reserve to cut borrowing costs. Higher prices for essentials such as petrol and food have fuelled frustration among consumers, while economists have warned that tariffs on imports could keep inflation elevated.
The Federal Reserve targets 2% inflation using the Personal Consumption Expenditures price indexes, rather than the CPI. The August PCE report is expected to reflect the latest price pressures in the economy and will be closely watched by policymakers.
