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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 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. It currently stands at a range of 3.5% to 3.75%. 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 quarter-point rate hike after the Fed’s next meeting on Sept. 16.What is the core US inflation rate?“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, a faster pace than the 0.2% forecasters had expected. It was up 2.4% over the year."The upside surprise to core inflation means that the Fed Is running out of reasons to wait," Angelo Kourkafas, Edward Jones' senior global strategist of investment strategy, said in a note to USA TODAY." While the headline annual inflation rate came in as expected, the stronger-than-anticipated increase in core services inflation adds to concerns that price pressures may be broadening, strengthening the case for a near-term policy response."Gas prices rise againAfter 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. When will gas prices fall?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.Consumers are wary, too. The University of Michigan reported on Sept. 11 that its measure of consumer sentiment fell to 47.8, down 7.5% from August and 13.2% from last year as survey respondents said they expect a resurgence in fuel prices to put further pressure on their budgets. Is food getting more expensive?Americans may have paid a bit more for select groceries in August, but the department’s food at home index was unchanged over the month. It was still up 2.2% over the year.Several items got pricier in August including eggs, dairy products and nonalcoholic beverages, which rose 2.9%, 0.3%, and 0.2% over the month, respectively. Some grocery staples became less expensive, including fruits and vegetables, whose price index fell 0.4% in August. Lettuce prices continued to fall, decreasing 6.2% after declining 16.4% in July as consumers avoided products tied to the cyclosporiasis outbreak. Prices vary by location and store. Use USA TODAY’s grocery tracker to see cost changes in your area. Dining out again cost consumers more in August. The department’s food away from home index rose 0.3% over the month and was up 3.4% over the year.What else saw price changes in August?Those who took an end-of-summer trip likely paid more for their hotels and accommodations; The department’s “lodging away from home” index rose 2.4% in August, a reversal from July when it fell 2.8%. And travelers paid more for plane tickets as the airline fares index rose 2.7%. Much like gas prices, airfare prices have surged over the last year, rising 23.4%.Even if Americans stayed home, housing costs also rose in August as rent prices and owners’ equivalent rent increased 0.2%.More expensive in August was also used cars and trucks, whose prices rose 0.4%. New car prices also increased, rising 0.3% over the month.On the bright side, car insurance costs continued their downward trend, falling 0.8% in August after a 0.3% decrease in July. Medical care costs also declined 0.2% last month, with dental services prices falling 0.6%. Electricity prices fell 0.2% from July to August, but were still up 3.8% over the last 12 months.Will the Fed raise interest rates?A rise in August inflation may be the final signal Federal Reserve policymakers need to raise its benchmark for interest rates it has so far left unchanged in 2026. A 0.3% rise in core inflation alongside the energy price spike and continued fighting between the United States and Iran “all but locks in” a Fed rate hike on Sept. 16, according to Seema Shah, Principal Asset Management’s chief global strategist. “The debate has quickly shifted from whether the Fed will hike to the more important question of how many hikes this cycle will ultimately require,” Shah said in a note to USA TODAY.The day before the report’s release, 70% of traders were predicting a quarter-point hike. About an hour after its release, 83% were betting on one, according to CME FedWatch.Still, a rate hike is not a guaranteed "slam dunk," according to Mike Skordeles, Truist Advisory Services' head of U.S. economics. Given the Fed cannot control what happens next in the Iran war or to oil and gas prices, and markets have already pushed long-term interest rates higher, the Fed may have as many reasons to hold the range steady as they do to raise it, he said.(This story was 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
