US core inflation rose at a faster-than-expected monthly pace in August leaving the door open to further interest rate hikes by the Federal Reserve.
The so-called core consumer price index, which excludes food and energy costs, rose 0.3% from July, the first acceleration in six months, data from the Bureau of Labor Statistics showed on Wednesday. Compared to a year ago, it increased by 4.3%, in line with estimates and marked the smallest increase in almost two years.
Economists favor the core gauge as a better indicator of underlying inflation than the headline CPI. That measure rose 0.6% from a month earlier, the most in more than a year, and 3.7% from a year earlier, reflecting higher energy prices. According to the BLS, gasoline costs accounted for more than half of the increase in the package of measures in August.
The report adds to concerns that renewed economic momentum is putting pressure on prices. As Federal Reserve officials become more optimistic that they can control inflation without a recession, a resumption of price growth may force them to raise interest rates further with the risk of causing the process to slow down.
The CPI is one of the last major reports the Federal Reserve will see before its meeting next week, where The authorities expect the rates to remain stable. Chairman Jerome Powell said last month that interest rates will remain high and may rise further if the economy and inflation do not calm down.
The returns of Treasuries rose, while S&P 500 index futures fell and the dollar index rose. Traders still expect the Federal Reserve to hold rates steady next week, while bets for a November hike hover around 50%.
