U.S. consumer prices accelerated in August, with the Consumer Price Index (CPI) rising 0.4% after a 0.1% increase in July, according to the Labor Department’s Bureau of Labor Statistics. Annual inflation held at 3.4%, while core CPI, excluding food and energy, increased 0.3% month-on-month and 2.4% year-on-year. The rebound in gasoline prices was a key factor behind the stronger headline reading.
The data has strengthened expectations that the Federal Reserve could raise interest rates at its meeting next week. Market-implied odds of a September 16 rate hike rose to 82%, from 68% before the inflation report, after briefly reaching 90%. However, economists and investors remain divided, with some arguing that the latest figures are not strong enough to force the Fed into an immediate rate increase.
Financial markets showed a mixed but largely positive reaction. U.S. stocks gained, with Nasdaq futures up about 1% and S&P 500 futures rising 0.9%, while Treasury yields initially climbed before reversing. Analysts cautioned that persistent inflation above the Fed’s target, combined with higher energy prices and geopolitical tensions, could keep price pressures elevated. Attention now turns to the Fed’s policy decision and upcoming economic data for clues about the path of interest rates.
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