Consumer prices rose 0.4% in August and 3.4% from a year earlier, as gasoline and other energy costs drove much of the monthly increase.
Image: A person refuels a vehicle at a gasoline pump. Photo: Ali Mkumbwa/Unsplash. Stock photograph.
U.S. inflation remained elevated in August, adding pressure to the economic debate just before Federal Reserve officials meet to decide their next interest-rate move.
The Consumer Price Index increased 0.4% on a seasonally adjusted basis during August, up from a 0.1% monthly rise in July, according to the Bureau of Labor Statistics. Prices were 3.4% higher than a year earlier, unchanged from July’s annual rate.
Energy pushed the monthly figure higher
Gasoline prices rose 3.9% during the month and accounted for more than one-third of the overall increase. The broader energy index climbed 2.1%, while shelter costs rose 0.3% and food prices increased 0.1%.
The annual energy increase was much larger: energy prices were 16.3% higher than in August 2025, including a 27.4% increase in gasoline. That helps explain why the headline inflation rate remained above the Federal Reserve’s longer-term goal even as some underlying measures eased.
Underlying inflation cooled slightly over the year
Prices excluding food and energy rose 0.3% in August and 2.4% over the previous 12 months. The annual core rate was down from 2.5% in July.
Shelter costs were 3.0% higher than a year earlier. Airline fares, communication services and education costs increased during August, while medical-care prices and motor-vehicle insurance declined.
The Federal Reserve meets this week
The Federal Open Market Committee is scheduled to meet September 15–16, according to the Fed’s official calendar. The meeting will include an updated Summary of Economic Projections.
At its July meeting, the committee kept the federal funds target range at 3.5% to 3.75%. The July policy statement said inflation remained elevated relative to the Fed’s 2% goal and specifically identified energy-related supply shocks as one source of price pressure.
The August inflation release does not determine what the Fed will do. Policymakers also examine employment, wages, growth, financial conditions and risks to both sides of their mandate. The latest BLS employment data showed payrolls rising by 162,000 in August while the unemployment rate held at 4.1%.
Why it matters
Inflation affects household purchasing power and the cost of borrowing throughout the economy. A sustained increase in energy prices can reach consumers directly at the pump and indirectly through transportation and production costs.
For borrowers, the Fed’s decision can influence the direction of credit-card, auto-loan and other interest rates, although those rates do not always move immediately or by the same amount. Investors will also watch the central bank’s projections for clues about its view of inflation, growth and future policy.
Sources
This report is based on the U.S. Bureau of Labor Statistics’ August 2026 Consumer Price Index release and Employment Situation release, together with the Federal Reserve’s meeting calendar and July FOMC statement.