US CPI Rises 0.4% in August, Bolstering Fed Rate Hike Expectations

US consumer prices accelerated in August as the cost of gasoline rebounded after two consecutive monthly declines. The Consumer Price Index (CPI) increased by 0.4% last month, surpassing the 0.1% rise in July. This development bolsters expectations that the Federal Reserve will raise interest rates next week.

The Labor Department's Bureau of Labor Statistics reported that the CPI rose 3.4% over the past 12 months, matching the same pace as July but slightly higher than economists' forecast of 3.3%. The core inflation index, which excludes food and energy prices, increased by 0.29%, or 3.5% annualized.

Gasoline prices rose by 3.9% in August, accounting for over one-third of the monthly increase in all items. Other indexes that saw gains include communication, lodging away from home, airline fares, education, and used cars and trucks. However, the index for medical care and motor vehicle insurance declined.

The Federal Reserve is set to make a decision on interest rates next Wednesday, with some officials indicating that Friday's report may sway their decision either way. Fed Chairman Kevin Warsh emphasized the importance of reining in price pressures, stating that 'the central bank will have work to do' if inflation doesn't subside.