Prices rose in August. Is it time to raise interest rates? - USA Today
U.S. consumer prices rose 0.4% from the month before in August, the Labor Department estimated Sept. 11, in line with forecasters' expectations.
A spike in gas prices drove the increase, rising 3.9% over the month as the Iran war further limited the global oil supply. Over the year, prices for all items rose 3.4%, matching July's pace. That was still enough to surpass workers' paychecks, which rose on average 3.1% over the same period.
After reaching a peak of 9.1% in 2022, year-over-year inflation had made its way back to 2.4% at the start of 2026. It jumped to 3.4% in March driven by rising oil and gas prices following the start of the war. After hitting 4.2% in May, it slowed to 3.5% in June and to 3.4% in July.
It, along with the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures price index, remain above the central bank's 2% annual target.
The Fed typically raises its benchmark for interest rates across the country to help tame inflation and lowers it to stimulate the job market. After Fed Chair Kevin Warsh said Aug. 28 policymakers’ focus should be on rising prices and U.S. employers added a surprising 162,000 jobs last month, markets are betting on a rate hike after the Fed’s next meeting on Sept. 16. However, one is not guaranteed.
“Core” inflation is the department’s way to measure price changes while excluding more volatile food and energy costs. It’s a metric that’s closely watched for evidence of whether underlying price pressures are easing amid supply shocks that can drive the all-items inflation rate higher.
It rose 0.3% from July to August and was up to 2.4% over the year.
After falling 2.9% in July, gas prices shot back up in August. They rose 3.9% over the month and were up 27.4% over the year.
Oil and gas prices have surged since the start of the Iran war, which escalated this week as U.S. and Iranian militaries traded strikes.
Amid rising attacks on oil refineries in the Middle East and Russia, futures for Brent crude, the international benchmark, and for West Texas Intermediate, the U.S. benchmark, are hovering near $100 per barrel.
For consumers, that means more pain at the pump. As of Sept. 11, the national average price of a gallon of regular unleaded gasoline was $4.30, up from $4.01 last month and $3.19 this time last year, according to AAA.
President Donald Trump told reporters on Sept. 9 the Iran war, now in its seventh month, will end and gas prices will fall below $2 per gallon, but not until after the midterm elections. Explaining his logic at a Republican convention later that day, he said Iran is holding out, hoping Democrats will win on Nov. 3.
“They’re hanging out for dear life, hoping that we lose, so they can deal with dumb, weak Democrats and they can have their nuclear bomb,” Trump said.
Experts are skeptical of Trump’s prediction gas prices could fall.
“I don't see any guarantees at all of that happening,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in an X post.
(This is a developing story that will be updated to add new information.)
Reach Rachel Barber at rbarber@usatoday.com, follow her on X @rachelbarber_, and subscribe to her newsletter "Making More of Your Money" here
