August Inflation Holds at 3.4 Percent as Energy Costs Stay High

Consumer prices rose 3.4 percent in August from a year earlier, the same pace as in July, the Labor Department reported Friday, according to PBS News. Energy prices remain elevated because fighting in the Middle East shows no sign of easing, PBS said, and the report is fueling speculation that the Federal Reserve will raise interest rates at its meeting next week.

The reading has climbed since the Iran war began. Fox News reported on Sept. 9 that inflation has risen from 2.4 percent to 3.4 percent since the war began in February, a rise it tied to the conflict.

Fuel is the clearest pressure. Regular gasoline averaged a record $4.14 a gallon over Labor Day weekend, according to AAA figures reported by The Associated Press, nearly a dollar more than a year earlier. CBS News reported that diesel topped its previous record of $5.81 from June 2022 to reach $5.85 a gallon, and PBS said diesel has hit record highs above $6 a gallon, which raises shipping costs for groceries and other goods. Susan Bell of the research firm Rystad Energy told CBS News earlier this month that higher diesel costs are “inflationary.”

Rate expectations were already shifting. After the August jobs report a week earlier, Fox Business reported, the CME FedWatch tool put the market-implied probability of a quarter-point rate increase at 60.4 percent, up from 49.4 percent the day before. The Fed’s benchmark rate sits in a range of 3.5 percent to 3.75 percent, and President Donald Trump urged the central bank after that report to lower rates, Fox Business said.

Markets took the data in stride. PBS reported that stocks regained some of their earlier losses that week, with the Dow rising more than 500 points on Friday, the Nasdaq gaining nearly 1 percent and the S&P 500 posting a solid weekly gain.

The central bank has not yet decided. Its meeting next week will show whether it raises rates, as speculation suggests, in response to inflation that has risen since February.