US headline inflation held steady in August while energy prices ticked up, maintaining pressure on the Federal Reserve for a likely rate hike next week as it battles to stem inflationary pressures uncorked by the Mideast Gulf war.
The consumer price index (CPI) rose at an annual 3.4pc pace in August, according to Labor Department data released today. That followed a 3.4pc pace in July that was down from 3.5pc in June. Core inflation, which strips out volatile food and energy, eased to a 2.4pc annual pace, compared with a 2.5pc rate in July.
"A September rate hike is now very likely, but a tightening cycle looks unwarranted," Pantheon Macroeconomics said in a note after the report. "We think the most likely outcome is that September's rate hike will be a one-time tightening."
Prior to the report, the CME FedWatch tool showed a greater than 70pc probability Federal Reserve policymakers will raise the target rate by a quarter point at its meeting on 16 September. The Fed has kept its target rate unchanged through five meetings this year amid mounting tariff and Gulf war uncertainty after lowering it three times late last year.
The energy index rose by an annual 16.3pc in August, compared with 14.7pc in July.
Energy commodities rose by 28pc in August compared with 24.7pc in July. Gasoline rose by 27.4pc on the year, up from 24.6pc the prior month. Fuel oil rose by 52pc following a 39.1pc gain in July. Piped gas services rose by 4.4pc on the year, following 4.3pc in July.
The food index rose at an annual 2.7pc in August following a 3pc pace in July.
Shelter rose at a 3pc pace, slowing from 3.2pc in July.
Services less energy services, considered a core reading of service prices, was unchanged at a 3pc pace.
New vehicle prices rose by 0.6pc in August on the year, compared with a 0.5pc rate in July, while used vehicles prices fell by 2.4pc in August compared with a 1.9pc decline in July.
Medical care services rose at a 2.5pc annual rate in August compared with a 2.7pc pace in July. Transportation services rose by 2.4pc in August, slowing from 2.9pc. Airline fares rose by an annual 23pc in August, compared with 25.5pc the prior month.
On a monthly basis, CPI rose by 0.4pc in August, after creeping up by 0.1pc in July, while the core index rose by 0.3pc for the month after a 0.2pc gain the month prior.
