US Inflation Rate Holds Steady as Gasoline Prices Surge, Fed Hike Odds Rise

The US inflation rate remained at 3.4% in August, according to the latest data from the Bureau of Labor Statistics. However, a sharp surge in gasoline prices pushed monthly consumer prices up by 0.4%, exceeding the previous month's increase. This unexpected rise has strengthened expectations for another Federal Reserve interest rate hike.

Core inflation, which excludes energy and food prices, eased to its lowest annual level since March 2021 at 2.4%. The improved core CPI reading was seen as a positive sign by some economists. However, the overall inflation picture remains mixed, with energy-driven inflation contributing significantly to the headline number.

The recent increase in oil prices has already started to filter through to other parts of the production chain, with August producer prices rising 0.4% monthly and 5.4% from a year earlier. The renewed focus on energy costs ahead of the Fed's September meeting suggests that policymakers may be more inclined to raise interest rates.

The market-implied odds of a September rate hike have increased to around 82%, up from approximately 68% beforehand, following the release of the inflation data. Meanwhile, Bitcoin held steady near $77,000 despite the rise in two-year Treasury yields.