Fed Pressure Rises as US Inflation Accelerates Amid Gas Price Spikes

US inflation accelerated last month to 3.4% year-over-year as gas prices spiked in response to renewed tensions in the Middle East, increasing pressure on Federal Reserve officials to raise interest rates.

The Labor Department reported that consumer price index rose by 0.4% from July to August, quadrupling the previous month's increase of 0.1%. Gasoline prices jumped 3.9% just from July to August, leaving gas prices more than 27% higher than a year earlier.

Federal Reserve Chair Kevin Warsh and other officials have signaled they would need to see continuing disinflation to leave rates where they are. However, Friday's report 'did not deliver that,' said Kathy Bostjancic, chief economist at Nationwide, indicating a more than 80% chance of a rate hike next week.

Prices rose across many goods and services, including appliances, car repairs, wireless phone services, airline tickets, hotel room prices, and diesel fuel. The core inflation rate, excluding food and energy categories, was 2.4% higher in August than a year ago, but increased by 0.3% from July to August.