Shafaqna English– U.S. consumer prices rose faster in August, with core inflation posting its biggest gain in four months, strengthening expectations that the Federal Reserve will raise interest rates next week. The Labor Department’s CPI report, following strong producer price data, suggested that core PCE inflation also picked up in August.
Markets priced in an 87% chance of a quarter-point hike at the Fed’s meeting on Tuesday and Wednesday. Most economists said firmer inflation and signs of a recovering labor market would push the Fed to raise rates not only next week but possibly again in October or December.
They warned that the ongoing Iran war and the resulting energy shock, along with an AI buildout, could spread inflation through the economy, especially as crude oil climbed back above $100 a barrel and diesel surpassed $6 a gallon for the first time.
The CPI rose 0.4% in August after a 0.1% gain in July, and was up 3.4% year-on-year, in line with expectations. Gasoline prices jumped 3.9%, accounting for more than a third of the monthly increase, while other motor fuels such as diesel surged 9.6%.
Food prices edged up 0.1%, with grocery prices unchanged, though egg prices rose 2.9%. Inflation-adjusted average hourly earnings fell 0.3% over the year, marking a fifth straight month of declining real wages.
Fed Chairman Kevin Warsh said the central bank will “have work to do” if inflation doesn’t head toward 2%, but Trump is pressuring the Fed to cut rates. Economists blamed political intimidation for the surge in long-term bond yields, with one saying the Fed has “painted themselves into a corner.”
Source: Reuters