U.S. consumer prices rose in August at the fastest rate in seven months, with increases in the cost of gas and housing accounting for almost all the gain.
The Labor Department reported that the consumer price index, or cost of living, increased 0.4% last month, while the rate of inflation over the past 12 months rose to 1.9% from 1.7% in the prior month.
The August gain was the largest since the 0.6% jump in January. Economists polled by Reuters had forecast the CPI rising 0.3% in August and 1.8% year-on-year.
Gas prices rose 6.3%, the biggest gain since January, after being unchanged in July. Food prices increased 0.1% after rising 0.2% in July, while the cost of rental accommodation surged 0.4% in August.
Excluding the volatile energy and food categories, consumer prices rose 0.2% compared to July and 1.7% year-on-year.
The August report was the last before Federal Reserve policy makers meet next week and as Fox Business reports, “it will likely influence their decision on whether to raise short-term interest rates before year end. Fed officials have been waiting for signs of rising inflation — coupled with low unemployment and steady job growth — before raising interest rates again.”
The overall trend in inflation remains subdued and weaker than earlier in the year. The Fed’s preferred inflation measure, the personal consumption expenditures price index, has consistently missed the central bank’s 2% inflation target since mid-2012 and rose only 1.4% year-on-year in July, the smallest gain since December 2015.
“Low inflation, despite the labor market being near full employment, is seen causing the Fed to delay raising rates for a third time this year until December,” Reuters said.
But according to Fox Business, inflation pressures may be “starting to pick back up after months of weakness that Fed officials have largely attributed to temporary factors.”
In a separate report, the Labor Department said average weekly earnings, adjusted for inflation, fell 0.6% from a month earlier. While hourly earnings rose, higher inflation more than offset the gain, and the average work week fell.