US consumer inflation held at 3.4% in August, remaining stubbornly above the Federal Reserve’s 2% target as surging fuel prices continued to put pressure on the economy ahead of next week’s closely watched interest-rate decision.
The August Consumer Price Index (CPI) reading means annual inflation was unchanged from July, underscoring the persistence of price pressures despite the Fed’s efforts to bring inflation back towards its target.
Energy prices have emerged as a major source of renewed inflationary pressure. Oil prices have climbed above $100 a barrel amid escalating conflict involving the United States and Iran, while gasoline and diesel costs have also surged.
The latest inflation figures come just days before the Federal Reserve’s September 15-16 policy meeting, where policymakers face a difficult choice over whether to raise interest rates.
Financial markets had been pricing in a growing probability of a 25-basis-point rate increase, with expectations rising to around 70% following stronger producer-price data and signs of resilience in the labour market.
The producer-price index, released on Thursday, showed wholesale prices rose 5.4% year-on-year in August, accelerating from 4.8% in July. Producer prices increased 0.4% during the month, while energy prices jumped 4.2%. Diesel prices alone surged 24.1% in August.
The August CPI report is particularly significant because it is the last major inflation reading available before the Fed’s September meeting.
