Hot inflation reading sets stage for possible Fed rate hike next week
The core annual rate held at 2.4%, well above the Fed’s 2% target.
Sam Williamson, senior economist at First American, said the inflation increase opens the door for the Fed to raise rates next week.
“The firmer core reading puts another thumb on the scale toward a Federal Reserve rate hike next week,” Williamson said. “With the labor market still on solid footing, policymakers have room to lean harder against inflation. That would likely keep borrowing costs elevated in the near term as markets price in a higher path for interest rates.”
Energy and shelter drive headline inflation higher
Gasoline was the primary catalyst behind the monthly gain. The BLS noted that “the index for gasoline rose 3.9 percent in August, accounting for over one third of the monthly all items increase.”
Shelter costs added 0.3%, transportation services rose 0.5%, and used vehicles gained 0.4%, a broad-based advance that underscored the persistence of price pressures.
