Inflation jumped in August thanks largely to a sharp increase in gasoline prices, according to data released Wednesday by the Labor Department.
The Consumer Price Index (CPI), a key gauge of inflation, rose 0.6 percent last month and 3.7 percent over the past year, in line with economists’ expectations. Gas prices were responsible for more than half of the overall monthly increase in inflation, the Labor Department said.
The steady increase in shelter prices also pushed overall inflation higher, the Labor Department said, rising for the 40th straight month.
Energy prices tend to spike during the summer as Americans travel more and use more electricity to cool their homes. Gas prices rose 10.6 percent in August but are down 3 percent from the same time in 2022.
While higher gas prices may not be cause for alarm, the steady rise in shelter costs and other services could alarm Federal Reserve officials.
“The jump in topline inflation was expected, but the slight uptick in monthly core inflation is slightly more worrying given the Fed’s focus on the stickier components of the index,” Morning Consult senior economist Kayla Bruun said in an analysis.
“The report was not without some positive signs for cooling inflation: core commodity prices continue to weaken, and the index’s largest component — shelter — posted its smallest increase since 2021.”
Fed officials are mulling whether to leave interest rates unchanged at a policy meeting next week or hike to keep up pressure on inflation.
Annual inflation has fallen sharply after peaking at 9.1 percent in June last year, and the U.S. economy is showing signs of weakening under high rates.
“After easing since last summer, energy prices spiked again in August, reigniting inflation and throwing the prospects of a September pause in interest rate hikes, and soft landing, into doubt,” wrote Julia Pollak, chief economist at ZipRecruiter, in an analysis.
Updated at 9:33 a.m.