US inflation picks up in August, adds to prospects for Fed rate hike

The US Consumer Price Index increased 0.4% in August, in line with expectations, after gaining 0.1% in July.

Annualized figure showed that inflation rose 3.4% in twelve months to August, unchanged from the previous month and matched forecasts.

So called core inflation, excluding the volatile food and energy components, rose 0.3% in August after gaining 0.2% in July, while annualized core CPI increased 2.4% in August after rising 2.5% previous month.

Inflation in August was mainly driven by fresh rise in gasoline prices on deteriorating geopolitical picture, adding to market expectations that the Federal Reserve could raise interest rates in next week’s monetary policy meeting.

The separate report, released on Thursday, showed an increase in the US Producer Price Index in August, pointing to strong rise in several key components that feed into the calculation of Personal Consumption Expenditures price index, Fed’s preferred inflation gauge.

Also, robust employment report for August, released last week, contributes to growing prospects for Fed rate hike.