US Inflation Spikes as Gas Prices Soar, Fueling Fed Rate Hike Fears

The US inflation rate picked up pace in August, rising to 3.4 percent compared to a year ago, and fueling concerns about the Federal Reserve's next move on interest rates.

According to the Labor Department's consumer price index report released Friday, gas prices spiked by 0.4 percent from July, quadrupling the 0.1 percent increase seen in the previous month.

This marks a worrying trend for inflation-fighters at the Fed, who had been counting on disinflation to hold back rate hikes. Federal Reserve Chair Kevin Warsh and other officials have signaled that they would need to see continued moderation in prices before leaving rates where they are.

'Today's August report did not deliver that,' said Kathy Bostjancic, chief economist at Nationwide. Gasoline prices are not the only rising costs: prices for appliances, car repairs, and wireless phone services also jumped last month.