U.S. inflation accelerated for the second straight month to an annual rate of 3.7 percent, up from 3.2 percent in August.
Prices rose 0.6 percent month-on-month through August, largely driven by a rise in gas prices, which accounted for more than half of the increase.
Accommodation costs also contributed to the increase, rising for the 40th consecutive month.
The consumer price index report comes a week before the Federal Reserve’s two-day policy meeting.
But despite the acceleration in inflation, the central bank is expected to keep interest rates stable while deciding whether another rate hike will be needed later in the year to combat inflation.
U.S. inflation accelerated for the second straight month to an annual rate of 3.7 percent, up from 3.2 percent in August
Core inflation, which ignores volatile prices including food and energy and is considered a better indicator of long-term trends, remained mostly moderate.
Monthly core inflation rose 0.3 percent in August – a slight increase from a 0.2 percent increase in July.
In the 12 months ended August, core inflation slowed to 4.3 percent – down from 4.7 percent the previous month.
Meanwhile, food prices rose 0.2 percent in August – the same rate as in July.
Last month, Americans experienced surprising pain at the pump as gasoline prices skyrocketed. The gasoline index rose 10.6 percent in August – a significant increase from the previous month’s 0.2 percent increase.
The total energy index, which includes gas, rose 5.6 percent in August from July.
According to OPIS, an energy data and analytics provider cited by The Wall Street Journal, the average price of a gallon of regular gasoline was $3.84 in August, compared to $3.60 in July.
Prices continued to rise this month. The national average for a gallon of gasoline was $3,811 as of Sept. 5, data from the American Automobile Association showed.
The price hasn’t been higher at this time of year since September 2012, when filling up at the pump reached $3.84 a gallon amid concerns about supply disruptions from the Middle East.
Last month, Americans experienced surprising pain at the pump as gas prices soared – putting upward pressure on overall inflation
This year’s seasonal peak is significant because it comes at a time when gasoline prices are generally falling as summer moves into fall and people drive less.
Oil production cuts by Saudi Arabia and Russia have caused prices to rise, adding to an already tight global supply.
In July, major producer Russia, which roiled markets nearly two years ago when it invaded neighboring Ukraine, pledged to cut its exports by 500,000 barrels a day.
At a time when U.S. officials are still trying to make up for the more than 1 million barrels per day in fuel production lost to the pandemic, the loss is significant and finally appears to be being felt.
Another factor contributing to the higher prices is the lack of refining capacity on the U.S. side following production issues from U.S. gasoline producers over the summer.
Record heat in fuel production hubs like Texas and Louisiana further hurt supplies after several refineries vowed to run their plants at up to 95 percent of capacity to pump out more fuel despite the heat.
But experts assume that volatile energy prices will not slow down the slowdown in inflation in the coming months.
“The spillover effect of energy prices on core inflation is small compared to the downturn we are seeing in other areas,” Sarah House, senior economist at Wells Fargo, told CNN.
“Firmer energy prices, if sustained, could rip through to the core and complicate the Fed’s job of getting inflation back to its 2 percent target on a sustained basis, but I think we’ll see this dynamic will be overwhelmed by inflation.” “Some of the supply and even demand distortions that we have seen since the pandemic continue to unwind,” she said.
In a statement, President Joe Biden said: “Headline inflation has also fallen significantly over the last year, but I know the rise in gas prices last month has put a strain on family budgets.”
That’s why I remain fully focused on reducing energy costs, including through investing in clean energy to strengthen our energy security.”