NEW YORK, Sept. 11 (Xinhua) -- U.S. consumer prices rose at an accelerated monthly pace in August, driven by a surge in energy costs, reinforcing expectations of a Federal Reserve interest rate hike next week.
The consumer price index (CPI) increased by a seasonally adjusted 0.4 percent for the month, putting the 12-month inflation rate at 3.4 percent, the U.S. Bureau of Labor Statistics reported Friday.
The core CPI, which strips out volatile food and energy components, came in at 2.4 percent. Both figures confirmed the prevailing narrative among investors that inflation in the United States remains too high for the central bank to keep rates at their current levels.
The headline monthly acceleration was heavily propelled by the energy sector. Gasoline prices jumped 3.9 percent in August, accounting for more than one-third of the index's total monthly gain. The broader energy index rose 2.1 percent for the month and surged 16.3 percent from a year ago, reflecting the intense price pressures stemming from the Iran war.
The pain extends beyond gasoline, threatening broader supply chains. The national average cost of diesel hit 6 U.S. dollars a gallon on Friday, according to the American Automobile Association (AAA), serving as the latest reminder of how energy spikes are driving inflation.
Speaking on Fox Business, Kevin Hassett, director of the White House National Economic Council, acknowledged on Friday that there is a "big, big issue" with diesel, citing the ongoing conflicts abroad as the primary reason prices have reached new highs.
Global oil markets reflect this volatility. Brent crude futures surged overnight amid the escalating conflict in the Strait of Hormuz, briefly reaching a four-month high of nearly 110 dollars a barrel before falling back to about 104 dollars.
The August CPI report serves as the final major inflation indicator the Federal Reserve will review before its two-day policy meeting next week, which will conclude Wednesday with a vote on its key interest rate. Following the data release, traders now see a roughly 90-percent probability of a rate hike.
"U.S. headline and core inflation came in well above the 0.17 percent month-on-month trend rate required to bring the annual rate down to the Federal Reserve's 2 percent target," said ING bank economic analyst James Knightley. "Given Fed Chair Kevin Warsh's hawkish spin at Jackson Hole, he will be pushing for a rate hike next week and a majority on the FOMC (Federal Open Market Committee) will likely agree."
Despite the growing certainty of tighter monetary policy, U.S. stocks rose on Friday. Investors looked to recover from four consecutive days of declines, looking past the rate hike expectations and finding some relief as oil prices retreated from their overnight peaks. ■