US Inflation Surges, Fueling Fed Rate Hike Expectations

The US Consumer Price Index (CPI) rose 0.4 percent in August, exceeding economists' expectations and boosting expectations of a Federal Reserve interest rate hike next week.

The Labor Department's Bureau of Labor Statistics reported the monthly increase, with gasoline prices jumping 3.9 percent after declining for two consecutive months. This accounted for more than a third of August's CPI rise.

Excluding volatile food and energy prices, the core CPI increased 0.3 percent, its biggest monthly gain since April. Core inflation rose 2.4 percent from a year earlier, down from 2.5 percent in July.

Financial markets now price in a roughly 91 percent probability of a Fed rate increase next week, up from about 72 percent on September 10.