US consumer inflation held steady at 3.4 percent in August, according to government data released Friday. The persistence of high prices has bolstered interest rates in the world’s largest economy next week.
The Consumer Price Index (CPI) remains significantly higher than levels seen earlier this year and continues to sit well above the Fed’s long-term target of two percent.
American households have struggled with years of elevated prices since the pandemic—a period when inflation reached 9.1 percent. The ability of citizens to afford basic necessities like fuel and food is expected to be a central issue in the upcoming November midterm elections.
Several Fed policymakers have indicated they would be prepared to raise interest rates if August inflation data did not show a slowdown in price increases. The central bank’s rate-setting committee meets next week.
Any move to raise rates will be sure to anger US President Donald Trump, who has launched an unprecedented campaign against the Fed’s independence, demanding policymakers lower interest rates to spur <a s agenda in the final two years of his term.
Fuel price increases accounted for one-third of the monthly rise in consumer prices, Friday’s data showed.
The price of gasoline in the US is up 44 percent since the start of the Iran war in February.
Record diesel prices—which hit an unprecedented $6 per gallon in the United States on Friday—have also driven up transportation, farming and construction costs.
The index for inflation excluding volatile fuel and food prices—so-called “core” inflation—rose 2.4 percent in August year-on-year.
“The renewed march higher in oil, gasoline and diesel prices add to concerns that higher energy prices could spill over to other goods and services and inflation expectations,” said Kathy Bostjancic, chief economist at Nationwide, in a note.
Market expectations of a rate hike surged in the wake of the inflation reading, with the probability of a 25-basis-point hike at 87 percent.
High prices have been hitting the US economy hard, with wholesale inflation picking up more than expected in August, according to government data on Thursday.
