Inflation stayed hot in August, keeping a September Fed rate hike on the table. The consumer price index rose 0.4% month‑over‑month and 3.4% year‑over‑year, according to the Bureau of Labor Statistics.
Consumer inflation remained elevated in August, with readings mostly in line with economists’ expectations. (Joe Raedle/Getty Images)
Expectations vs. reality
Economists polled by LSEG expected a 0.3% monthly rise and a 3.4% annual increase, figures that match the actual data. Core prices, which strip out food and energy, rose 0.3% month‑over‑month and 2.4% year‑over‑year, slightly above the forecast.
The cost of living breakdown
Energy prices jumped 2.1% in August, driving the annual increase to 16.3%, with gasoline up 3.9% month‑over‑month and 27.4% year‑over‑year. Electricity fell 0.2% month‑over‑month but rose 3.8% annually.
Food prices edged up 0.1% month‑over‑month, with food at home flat and food away from home up 0.3%. Meat, poultry and fish fell 0.1% month‑over‑month but are 3.5% higher annually; beef and veal dropped 1% month‑over‑month yet are 5.9% higher yearly. Egg prices rose 2.9% month‑over‑month and are down 23% year‑over‑year. Fruit and vegetable prices slipped 0.4% month‑over‑month, led by a 6.2% drop in lettuce, and are up 3.2% annually.
Housing costs rose 0.3% month‑over‑month, pushing the shelter index 3% higher annually, while tenants’ and homeowners’ insurance are up 4.1%. Transportation services rose 0.5% month‑over‑month and 2.4% annually, and airline fares jumped 2.7% month‑over‑month, up 23.4% year‑over‑year.
What experts are saying
Goldman Sachs global head and co‑chief investment officer Alexandra Wilson‑Elizondo said the CPI came in as expected, making next week’s rate decision a toss‑up, but recent energy spikes and persistent core inflation suggest the Fed may still hike.
Navy Federal Credit Union chief economist Heather Long warned that inflation is broad‑based, citing gains in restaurants, vehicles, shelter and transportation, and urged a September rate hike to prevent worsening.
Fed Chair Kevin Warsh and central bank policymakers are set to hold their next interest rate meeting next week. (David Paul Morris/Bloomberg via Getty Images)
What does it mean for the Fed and interest rates?
The August data lifted the probability of a September rate hike to 85.6% in the CME FedWatch tool, up from 72.4% a week earlier. Markets now see a 25‑basis‑point increase as the most likely outcome.
What does it mean for the stock market?
The S&P 500 rose 0.91%, the Dow 0.96% and the Nasdaq 0.98% in early trading.
