Sharply higher fuel prices push up US inflation in August

Consumer inflation in the United States picked up in August for a second straight month. A spike in gas prices pushed up inflation in August, yet most other costs rose at a more modest pace, evidence that consumer price increases overall are still cooling.

Treasury yields rose on Wednesday after US consumer prices in August posted the biggest increase in a year amid the surging cost of gasoline, but the pace of underlying inflation moderated, suggesting the Federal Reserve can keep interest rate hikes on hold next week.

The consumer price index (CPI) increased by 0.6% last month, the largest gain since June 2022, the Labor Department said on Wednesday. The CPI had risen 0.2% for two straight months.


The two-year Treasury yield, which reflects interest rate expectations, rose 1.5 basis points to 5.020%, while the yield on the benchmark 10-year note was up 3.6 basis points at 4.300%.

In a set of conflicting data on Wednesday, the Labor Department said the consumer price index rose 3.7% in August from a year ago, up from a 3.2% annual pace in July. Yet excluding the volatile food and energy categories, so-called core prices rose 4.3%, down from 4.7% in July and the smallest increase in nearly two years. That remains far from the Federal Reserve’s 2% target.

Despite the seemingly divergent figures, the decline in the core measure could add to optimism that inflation is coming under control. The Federal Reserve closely tracks core prices because they are seen as a better indicator of future inflation trends. Wednesday’s figures also make it more likely the Fed will skip an interest rate hike at its meeting next week. While more expensive gas could elevate inflation this month as well, most economists forecast that inflation will slowly decline through the end of the year.