A key measure of US consumer prices, the core Consumer Price Index (CPI) excluding food and energy, increased by 0.3% in August from the previous month. This figure surpassed the median estimate of a 0.2% rise from a Bloomberg survey. On an annual basis, core CPI advanced by 2.4%.
This stronger-than-expected inflation data comes just ahead of the Federal Reserve's policy meeting next week. The persistent rise in prices is seen as bolstering the case for Fed officials to raise interest rates in an effort to curb inflation.
The overall Consumer Price Index (CPI) for August rose by a seasonally adjusted 0.4% for the month, resulting in a 3.4% increase over the last 12 months. This broader measure was in line with Dow Jones consensus estimates. Energy prices were a significant contributor to the headline increase, with gasoline prices jumping 3.9% and the broader energy index rising 2.1% due to escalating tensions in the Middle East, marking a 16.3% increase year-over-year. Food prices edged up 0.1%, with food at home costs remaining flat, leading to a 2.7% annual acceleration in the food index.
Other notable increases included a 0.3% rise in shelter costs, a 0.5% increase in transportation services, and a 0.4% increase in used cars and trucks prices, alongside a 0.3% rise in new vehicle prices. Following the report, traders increased their bets on a quarter-percentage-point rate hike by the Federal Open Market Committee, with odds jumping to approximately 90%, according to CME Group's FedWatch tracker. The Federal funds rate is currently in a range of 3.5%-3.75%.
