Consumer prices rose 0.4% in August after rising 0.1% in July, driven by surging fuel costs from the war against Iran, the government said in a closely watched update.
The Bureau of Labor Statistics said the Consumer Price Index rose 3.4% for the year ending in August, consistent with expectations and level with the July reading. The lack of improvement could prod the Federal Reserve to raise interest rates at its upcoming meeting to tame inflation.
Notably, the gasoline index rose 3.9% in August, “accounting for over one third of the monthly all items increase,” according to BLS.
“Indexes that increased over the month include communication, lodging away from home, airline fares, education and used cars and trucks,” the bureau said Friday. “Conversely, the index for medical care and the index for motor vehicle insurance were among the major indexes that decreased in August.”
The CPI measures what American consumers pay for common goods and services and will help the Federal Reserve determine whether to raise interest rates at its Sept. 16 meeting.
Americans saw price relief in June, when CPI fell more than expected. Inflation eased due to a sharp decrease in energy prices alongside cooling tensions in the Middle East.
But the U.S. and Iranian militaries reengaged after a memorandum of understanding from mid-June fell apart, resulting in new energy shocks.
Recent turmoil in the Middle East caused oil prices to spike above $100 per barrel.
The average U.S. price of gasoline rose to $4.30 per gallon on Friday, up from about $3 when the war began, and diesel costs an all-time high of $6.06 per gallon, according to the AAA motor club.
The CPI report followed another key inflation reading on Thursday, the Producer Price Index, which said wholesale prices rose 0.4% in August, or 5.4% over the past year.
Inflation surged during the Biden years and remains above the Fed’s 2% target rate under President Trump, who is battling voters’ concerns about high prices heading into the November midterms.
The cost of living is the top concern for voters who will reshape Congress in the midterm elections this November.
Democrats say President Trump failed to tame prices as promised and kept them elevated through tariffs, or duties on foreign goods, and his war on Iran, which increased oil and gasoline prices.
Mr. Trump says prices will come down once the conflict with Iran is over, and that short-term pain is worth the goal of preventing Tehran from having a nuclear weapon.
Forecasters say the Fed could increase rates slightly to tame inflation, even as Mr. Trump pushes for a cut.
CME FedWatch, a key forecaster, sees a 70% chance of a rate increase, though some economists think the Fed will keep rates steady.
The European Central Bank authorized a rate increase on Thursday to tame inflation driven by the Iran war.
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