US Inflation Surges to 3.4% as Iran War Fuels Fuel Price Spike
The August inflation rate in the US has surged to 3.4% annually, driven largely by a sharp increase in fuel prices. The Bureau of Labor Statistics released the Consumer Price Index data on Thursday, showing that the all-items index rose 0.4% in August on a seasonally adjusted basis.
The energy index increased by 2.1% last month and is up 16.3% from a year ago. Gasoline prices are now 27.4% higher than they were twelve months earlier, largely due to the US military campaign against Iran, which has kept Brent crude above $88 a barrel through most of the summer.
The Federal Reserve's decision on whether to raise interest rates at its meeting next Wednesday is all but certain, with futures markets indicating a 90% probability of a rate hike. A 25 basis point increase would push the federal funds target to a range of 3.75% to 4%, the highest since the tightening cycle ended in 2023.
Fed Chair Kevin Warsh has already signaled his inclination towards raising rates, describing inflation as 'still too high' and noting that more than half of personal consumption expenditure components were running above 3% annually.