8 minutes agoShareSaveAdd as preferred on GoogleMichael RaceBusiness reporter, New York
Getty ImagesPrices in the US rose by 3.4% in the year to August, with the cost of living pushed up by higher gasoline prices, official figures show.
The overall inflation rate was unchanged from July, according to the Bureau of Labor Statistics (BLS).
It comes ahead of the Federal Reserve making its latest interest rate decision next week, with growing expectations they will be increased in a bid to slow the rate at which prices are rising.
US household budgets have come under mounting pressure, especially at the fuel pumps, with a gallon of diesel hitting a new all-time high of more than $6 on average on Friday.
The spike in fuel prices has been driven by higher global oil prices, caused by supply disruptions as a result of the US-Iran war. The price of benchmark Brent crude oil is hovering above $100 a barrel following recent escalations in the conflict.
As well as directly driving up costs at the pumps, higher oil prices can also make transporting goods more expensive. Such costs can be passed down to consumers through steeper prices for food and other staples, pushing up the overall cost of living.
The BLS said gasoline prices rose 3.9% last month alone, accounting for more than a third of inflation overall. Wages are also failing to keep up with the rising cost of living, with separate figures showing real average hourly earnings fell by 0.3% over the past year.
There are increasing expectations that interest rates will be hiked given the current inflation picture, strong jobs market and President Donald Trump saying he does not think oil prices will come down until the war with Iran ends, which he expects to happen after November’s elections.
Fed chair Kevin Warsh has been tight-lipped on any future decisions, but his comments that the central bank’s focus should be on slowing price rises has further fuelled expectations of a rise.
Interest rates have been left on hold for five meetings in a row, at between 3.5% and 3.75%. Higher rates are a tool used by central banks aiming to slow the pace price rises.
By pushing up the cost of borrowing for things such as mortgages, loans and credit cards, it is hoped consumers will spend less and the rate of price increases will slow. Increased rates can encourage people to save money by increasing their potential returns.
Cost of Living US Federal ReserveInflationUS economyUnited States
