US Inflation Hits 3.4% as Fed Hike Bets Build

US consumer prices increased by 0.4% in August, the Labor Department reported on September 11. This monthly gain met the expectations of financial forecasters. Year-over-year inflation reached 3.4%, matching the pace seen in July. This rate exceeds the average wage growth of 3.1% over the same period. The Federal Reserve’s preferred inflation measure also remains above its 2% annual target.

Gasoline prices drove the August increase, rising 3.9% from the previous month. The spike follows supply constraints linked to the conflict in Iran. Inflation had fallen to 2.4% by the start of 2026 after peaking at 9.1% in 2022. It jumped to 3.4% in March as oil and gas costs climbed. The rate slowed slightly to 3.5% in June and 3.4% in July.

Market Expectations for Rate Hike

Traders expect the Federal Reserve to raise benchmark interest rates at its September 16 meeting. Fed Chair Kevin Warsh stated on August 28 that policymakers must focus on rising prices. The US economy added 162,000 jobs last month, a figure that exceeded expectations. These factors support the case for tightening monetary policy. However, a rate increase is not guaranteed at this stage.

Core Inflation Excludes Volatile Sectors

Core inflation, which excludes food and energy, rose 0.3% in August. The annual core rate reached 2.4%. This metric helps assess underlying price pressures independent of supply shocks. Analysts watch this figure to determine if inflation is easing. The data suggests persistent costs despite volatile energy prices. GN auto markets/bonds: interest rates remains a key driver of current economic forecasts.