August inflation report pushes rate hike odds to 85%

The Consumer Price Index climbed 0.4% from July as gasoline drove more than one-third of the monthly increase.

Consumer prices rose 3.4% on an annual basis in August, maintaining pressure on Federal Reserve policymakers ahead of their benchmark interest rate decision.¹²

The monthly pace recorded by the Bureau of Labor Statistics picked up after a muted 0.1% increase in July.² Unadjusted twelve-month inflation matched the rate recorded the previous month, while underlying price pressures continued across energy, shelter, and consumer services.²

Gasoline costs accounted for more than one-third of the overall monthly rise in the Consumer Price Index.¹² The gasoline index jumped 3.9% in August, bringing its annual increase to 27.4%.² Broader energy costs advanced 2.1% during the month, reversing consecutive monthly drops of 5.7% in June and 1.5% in July to stand 16.3% higher than twelve months earlier.² Electricity costs provided minor relief, declining 0.2% on a monthly basis while remaining 3.8% above levels from a year ago.²

Global oil disruption contributed directly to the energy advance.¹ Brent crude traded above $100 per barrel as tensions persisted around the Strait of Hormuz during the conflict involving Iran.²¹ The survey window for the government inflation release concluded before the latest upward spike in energy prices took effect.²

Those rising energy expenditures reshaped expectations in financial markets. Trading tracked by the CME FedWatch tool indicated an 85.6% probability of a 25 basis point rate increase at the central bank policy meeting next week.² That expectation rose from 72.4% the previous day, up from 59.4% recorded one week earlier.² The current benchmark target range set by the central bank sits between 3.5% and 3.75%.²

A stronger jobs report released earlier in September had already reinforced expectations of tighter monetary policy.¹ As an unnamed chief investment officer told The Wall Street Journal regarding the rate outlook, the central bank had few alternatives, noting that "the Federal Reserve’s hands are tied" and adding that "a rate hike next week is all but assured."¹

Central bank policymakers led by Federal Reserve Chairman Kevin Warsh will assemble next week to evaluate the numbers.² Alexandra Wilson-Elizondo, global head and co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management, noted that while headline figures matched consensus projections from an LSEG survey of economists, the underlying trajectory remains difficult to manage.² Wilson-Elizondo said the policy decision has become "a jump ball" and warned that "the data does not fully capture some of the inflation pressures that have emerged more recently, and there is little evidence to suggest inflation is returning to target in the near-term."²

Core inflation, which excludes volatile grocery and fuel prices, increased 0.3% in August after a 0.2% monthly rise in July.² The monthly core reading ran slightly hotter than the LSEG consensus forecast, while the annual core increase slowed to 2.4% from 2.5% in July.² The annual core figure aligned with expectations from economists polled by LSEG.²

Heather Long, chief economist at Navy Federal Credit Union, cautioned that persistent price increases extend well beyond fuel pumps.² Long said that "America has an inflation problem and it's more than just high gas and diesel prices."² Long argued that price gains across vehicles, shelter, and transportation require immediate policy intervention, stating that "the Federal Reserve needs to hike in September to prevent this from worsening."² Warsh has indicated that policymakers are closely tracking how broad-based price pressures remain across the economy.²

Grocery prices showed mixed results within the broader food index. Overall food costs rose 0.1% from July and 2.7% from a year earlier, while food purchased for home consumption was unchanged on the month.² Egg prices climbed 2.9% in August, although they remained 23% lower than a year ago as poultry flocks recovered from an avian flu outbreak.² Lettuce costs dropped 6.2% following a cyclospora outbreak, leaving that index down 2.2% over twelve months.² Food away from home increased 0.3% on a monthly basis and 3.4% compared with last year.²

Housing costs maintained steady upward momentum. The shelter index climbed 0.3% in August and stood 3% higher than a year earlier, while tenant and household insurance costs remained unchanged on the month and 4.1% higher than last year.² Transportation services prices climbed 0.5% from July and 2.4% year over year, propelled by airline fares that jumped 2.7% during the month and 23.4% on an annual basis because of elevated jet fuel costs.²

Stock markets absorbed the inflation report with morning gains despite the shift toward higher borrowing costs. The benchmark S&P 500 index rose 0.91% in morning trading, while the Dow Jones Industrial Average gained 0.96% and the Nasdaq Composite added 0.98%.²

Reporting note: this piece draws on Bureau of Labor Statistics data and market pricing reported September 11, 2026, by Jake Angelo for Semafor and Eric Revell for Fox Business.

Source: Semafor, September 11, 2026.

References

This article is based on 2 sources, listed in the order they are cited.

1. 1 JA Jake Angelo announcement · 11 Sep 2026 US inflation stayed hot in August, boosting odds of a rate hike See the source
2. 2 FB Fox Business third party · 11 Sep 2026 August CPI inflation: Consumer price growth remained elevated | Fox Business See the source