(US) – The latest data from the Labor Department has revealed that consumer prices in the US experienced a higher-than-expected increase last month, primarily driven by rising rent and fuel costs.
The annual inflation rate reached 3.7% for the 12 months leading up to August, a notable increase from the 3.2% recorded in July.
These figures highlight the ongoing difficulties faced by officials in their attempts to stabilize prices, following last year’s rapid inflation, the fastest in decades.
Although the inflation rate has decreased significantly from its peak last year, analysts suggest that the US central bank, which targets a 2% inflation rate, remains concerned that the issue is not yet resolved.
The bank has already raised its benchmark interest rate to its highest level in 22 years, currently targeting a range of 5.25% to 5.5%, in an effort to curb rising prices.
Fuel prices drive US inflation increase
A meeting later this month will consider whether further rate hikes are necessary.
The report revealed that fuel prices were the primary driver of the inflation increase from July to August, with a monthly inflation rate of 0.6%, the highest since June 2022.
Even after excluding the volatile food and fuel categories, prices still rose by 0.3%, exceeding expectations.
Housing costs, which were expected to cool this year and constitute a significant portion of the US consumer price index, continued to rise for the 40th consecutive month.
While the Federal Reserve is unlikely to raise interest rates at its upcoming meeting, especially since rate increases have little impact on fuel prices, which were the main contributors to August’s inflation rise, these new figures could influence future actions.
Charles Hepworth, Investment Director at Zurich-based asset management group GAM Investments, suggests that the data “is unlikely to encourage the Federal Reserve that the necessary cooling in the economy that they are looking for is being achieved as quickly as they want.”
He believes that a rate hike in November remains a possibility.
Higher interest rates are intended to cool the economy by promoting saving and making it more difficult for households and businesses to obtain loans for various purposes. In theory, as the economy slows down, price increases should also ease.
Despite these efforts, Federal Reserve Chairman Jerome Powell cautioned last month that inflation levels were still “too high,” indicating a readiness to raise rates further if needed to achieve the bank’s objectives.