US inflation holds steady at 3.4% in August ahead of Fed decision

Consumer prices in the United States rose by 0.4% in August compared to July and increased by 3.4% year-on-year, the Bureau of Labor Statistics (BLS) announced on Friday, September 11. This monthly acceleration, following a 0.1% rise in July, comes just days before the Federal Reserve’s next monetary policy decision.

The rebound in gasoline prices significantly contributed to the increase. The gasoline index climbed by 3.9% month-on-month, accounting for more than one-third of the overall price rise in August. The energy sector overall saw a 2.1% increase for the month.

Excluding food and energy, the so-called core inflation rose by 0.3% in August, up from 0.2% in July. Year-on-year, it slowed to 2.4%, down from 2.5% the previous month. Housing costs increased by 0.3%, while airline fares rose by 2.7%.

Food prices advanced by 0.1% for the month and by 2.7% year-on-year. The BLS noted a 0.3% increase in prices for meals eaten out, while prices for food consumed at home remained largely stable in August.

Energy continues to pressure the Fed

Over the past twelve months, the energy index has risen by 16.3%, driven by a 27.4% increase in gasoline prices. Reuters and the Associated Press link the rise in fuel prices to ongoing tensions in energy markets, particularly as Brent crude surpassed $108 this week and disruptions in the Middle East continue to impact supplies.

These figures have bolstered expectations for another monetary tightening. The Federal Reserve maintained its benchmark interest rate in July within a range of 3.50% to 3.75%, while several officials were already advocating for a hike to curb inflation that remains above the 2% target.

Markets reacted without panic: US stocks rose following the announcement, while bond yields fluctuated. However, investors continue to factor in a strong likelihood of a rate hike in the near term, according to Reuters.

The Fed’s monetary policy committee will meet on September 15 and 16. The decision on interest rates is set to be announced on September 16 at 2:00 pm Washington time, ahead of a press conference by the central bank’s chair.