Inflation Surges in August, Setting Stage for Fed Rate Hike

The U.S. inflation rate ticked up in August, rising by 0.4% for the month and reaching an annual rate of 3.4%. The consumer price index saw significant jumps in technology, airfare, and communication sectors. Core inflation, excluding food and energy prices, jumped more than expected, setting the stage for a potential Federal Reserve interest rate hike next week.

Heather Long, chief economist at Navy Federal Credit Union, noted that 'America still has an inflation problem.' The increase in core inflation was led by rising costs in the technology sector, with the price of computer software, accessories, and related items increasing 25.4% over the past year.

The data released on Friday also showed a surge in energy prices, with gasoline prices rising 3.9% in August and accounting for more than one-third of the monthly increase. The average price of diesel fuel hit $6 per gallon for the first time. Several other areas of pain for consumers were evident in the report, including rising airline fares and the cost of education.

The Federal Reserve's next policy meeting takes place on Tuesday and Wednesday, with market odds for a rate hike increasing to nearly 90% following the release of the inflation data. A rate hike could add pressure on consumers already dealing with high rates and prices.