The August inflation report came in where Wall Street analysts expected — but for consumers, it means a pace of price increases that remains higher than recent norms, largely driven by energy prices.
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Overall prices rose 0.4% from July to August and are up 3.4% compared to last August. Core inflation, which removes fuel prices from the calculation, did not change, indicating that energy is not the only factor keeping prices elevated.
The Federal Reserve has a target inflation rate of 2%. The country was on track toward that goal until the Iran conflict spiked inflation to 4.3% last May. Prices have come down since then, but inflation has remained stuck around the 3.5% range for the last three months.
The biggest inflation drivers in August included home heating oil, which rose 10% in a single month, and diesel, which rose 9.6%. Outside of energy, prices spiked for cell phone service, salad dressing, and women's dresses.
Some categories did see price decreases. Produce — including lettuce, tomatoes, and apples — fell in price, as did cell phone hardware and toys.
The stubborn inflation reading has experts expecting the Federal Reserve to raise interest rates at its meeting next week, pushing rates to 4% on the high end. Higher interest rates typically lead to higher consumer borrowing costs, particularly for shorter-term loans and credit cards.
For consumers in the Valley, the ABC15 Affordability Index shows conditions are still slightly more affordable compared to last month. Gas prices and airfares are up, but the ABC15 Smart Shopper Grocery Basket is down 6.5%.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
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