US consumer price inflation remained at 3.4% year-on-year in August, while prices rose 0.4% month-over-month, up from 0.1% in July, according to Bureau of Labor Statistics data. That left another Federal Reserve interest-rate increase firmly in play. Core CPI, which excludes food and energy, rose 0.3% monthly, above the 0.2% economists expected, though the annual core rate eased to 2.4% from 2.5%.
Energy costs were a key driver: gasoline rose 3.9%, accounting for more than one-third of the overall monthly increase, while the broader energy index climbed 2.1%. Food prices rose just 0.1%. Housing costs advanced 0.3%, airfares increased 2.7%, and used vehicle prices rose 0.4%. Separately, producer prices rose 0.4% in August, lifting annual PPI inflation to 5.4%.
Traders pushed the probability of another Fed hike to roughly 70% based on CME Group FedWatch pricing, with odds of a December increase near 60%. The European Central Bank also raised rates earlier Thursday, citing inflationary pressures. RSM US chief economist Joseph Brusuelas said the combined PPI and CPI reports "demand action" from the Fed and argued that policymakers should reverse the three rate cuts implemented in late 2025. He cited war-driven energy shocks, tariffs, and artificial-intelligence infrastructure demand as persistent inflationary forces.
Despite the hawkish signals, stock futures rose, with S&P 500 futures up 0.5% and Nasdaq futures gaining 0.7%.
