US consumer prices accelerate in August, push Fed closer to rate hike

Key Points:

• U.S. consumer prices rose 0.4% in August, with core inflation (excluding food and energy) increasing 0.3%, the largest monthly gain since April, reinforcing expectations of a Federal Reserve interest rate hike next week.
• Gasoline prices surged 3.9% after two months of decline, contributing significantly to the CPI increase, while food prices showed minimal change, with some categories like lettuce falling due to a Cyclospora outbreak.
• The inflation-adjusted average hourly earnings declined 0.3% year-over-year in August, marking a continued squeeze on real wages and contributing to declining consumer sentiment across political lines.
• Rising energy costs, fueled by ongoing geopolitical tensions and crude oil prices above $100 per barrel, are expected to spread inflationary pressures throughout the economy, increasing the likelihood of multiple Fed rate hikes later this year.
• Consumer frustration over inflation is impacting political dynamics, with President Trump’s approval ratings declining amid concerns over the cost of living, and economists warning that political pressure on the Fed could complicate monetary policy decisions.