Inflation Rises Again, Increasing Pressure on Fed

US inflation numbers for August were higher than expected, sparking concerns about rising prices and pressure on the Federal Reserve to increase interest rates. The consumer price index rose 0.4% from July to August, contributing to a 3.4% annual inflation rate. Core inflation, which ignores volatile food and fuel prices, rose 0.3% on a monthly basis.

Energy was a key driver of inflation, with gasoline prices rising 27.4% on an annual basis due to the ongoing war with Iran. Other areas saw significant price hikes, including airfares, hospital costs, car repairs, clothing, and restaurant prices. The cost of shelter rose 3%, while food prices increased by 2.7%.

Analysts warned that inflation has erased all wage gains since April, with wages growing 3.1% over the last year but topline inflation at 3.4%. Mark Zandi, chief economist at Moody's Analytics, said the economy is under pressure from multiple sources, including the Iran war and President Trump's trade policies.

The persistent pricing pressure has spilling over into consumer sentiment, with the University of Michigan's survey showing a drop in expectations for both personal finances and business conditions. The probability of an interest rate hike by the Federal Reserve next week is now at 87%, according to the CME FedWatch tool.