Fed Faces Pressure to Hike Rates as US Inflation Surges Amid Middle East Tensions

The US inflation rate accelerated in August due to rising gas prices caused by renewed fighting in the Middle East. The consumer price index rose 3.4% compared to a year ago, with prices increasing 0.4% from July, more than quadrupling the previous month's increase of 0.1%. This news puts pressure on the Federal Reserve to raise its benchmark interest rate next week, which could lead to higher mortgage and auto loan costs in the coming months.

Gasoline prices have spiked 3.9% just from July to August, leaving gas prices over 27% higher than a year earlier. The nationwide average cost of a gallon of gas is now $4.30, a 7% increase from last month. Airline tickets rose 2.7% on a monthly basis and have soared more than 23% from a year earlier.

The core prices, excluding food and energy categories, were 2.4% higher in August than a year ago, down slightly from July's 2.5%. However, on a monthly basis, core prices rose 0.3% from July to August, the largest increase since April.