U.S. consumer prices rose 3.4% in the 12 months ending August 2026, matching the annual rate recorded in July. While the headline figure remained steady, monthly data released by the Bureau of Labor Statistics indicates that inflation momentum accelerated toward the end of the summer, with the Consumer Price Index (CPI) increasing 0.4% in August compared to a 0.1% rise in July.
The acceleration was driven largely by energy costs, which offset cooling in other sectors of the economy. Gasoline prices surged 3.9% in August alone, accounting for more than one-third of the total monthly increase in overall consumer prices.
The energy squeeze is particularly visible in the diesel market, where the national average reached a record $6.06 per gallon on Friday, September 11. Over the last 12 months, fuel oil prices have increased 52%, creating a significant headwind for transport-heavy industries and household heating budgets.
In contrast to the volatile energy sector, “core” inflation—which excludes food and energy prices—showed signs of a gradual slowdown. Core CPI rose 2.4% year-over-year in August, a slight decrease from the 2.5% rate seen in July. However, specific service categories within the core index provided unexpected upward pressure. Wireless phone service prices jumped 5.9% in August, the largest monthly increase on record for that category.
Shelter costs, which have been a persistent driver of inflation over the past two years, rose 0.3% in August. This brought the 12-month gain for the shelter category to 3.0%, reflecting a slower pace of growth than the peaks seen in 2024 and 2025.
The divergence between cooling core prices and the energy-led spike in headline inflation complicates the landscape for the Federal Reserve. The central bank is scheduled to meet for its next policy session on September 15-16.
Following the release of the August CPI data, market probability for a 25-basis point interest rate hike rose to 86.5%.
