Fed Hike Expected as Inflation Hits Pains

The August inflation report from the Federal Reserve has dealt a blow to hopes of continued disinflation. According to Kathy Bostjancic, chief economist at Nationwide, 'Today's August report did not deliver that.'

Gas prices jumped 3.9 percent just from July to August, leaving them more than 27 percent higher than a year earlier. The nationwide average cost of a gallon of gas on Friday is $4.30, which is 7 percent higher than a month ago.

The rising fuel costs have pushed up the cost of shipping for groceries and other goods, with diesel prices hitting record highs above $6 a gallon. Other price increases include airline tickets, which rose 2.7 percent on a monthly basis and soared more than 23 percent from a year earlier, as well as hotel room prices, which climbed 2.4 percent just from July to August.

Economists are now worried that these price increases will spill into other parts of the economy, with Chris Mitchell, a customer service agent for an auto parts retailer, saying he is struggling to keep up with rent, food, and other costs. He added, 'I've been hurting, I need a raise.'

The inflation data has led many economists to pencil in a rate hike at the Fed's next meeting Sept. 15-16, with some even predicting a 10-point jump from Thursday.