U.S. CPI Holds at 3.4% as Gasoline Jumps; Core Inflation Cools to 2.4%

U.S. inflation held steady in August, but the composition shifted. The Consumer Price Index (CPI) rose 0.4% month over month, a sharp pickup from July's 0.1% increase, keeping the year-over-year rate at 3.4%. Underlying price pressures continued to ease. Core CPI, which excludes food and energy, increased 0.3% on the month and slowed to 2.4% year over year from 2.5%. Energy was the clear driver of the firmer headline reading. Gasoline prices jumped 3.9% in August, and the broader energy index rose 2.1%, offsetting cooling across several core categories. Average U.S. gasoline prices climbed to about $4.19 a gallon in August from $4.06 in July, after two straight months of declines. Reuters had flagged gasoline as the most likely factor to lift monthly inflation. Oil markets remain a key risk. Brent crude has stayed above $100 after escalating Middle East supply disruptions, raising the odds that fuel costs remain elevated into autumn. That has direct consequences for consumers, and higher diesel and transportation costs can also feed through to shipping, groceries and other goods. The split between headline and core inflation complicates the policy signal. A 2.4% core reading suggests underlying inflation is still trending lower, even as the 0.3% monthly gain came in slightly firmer than expected. The report lands just days before the Federal Reserve's Sept. 15–16 meeting. With oil above $100 and Treasury yields near 5%, markets had been leaning toward another rate hike. After the CPI release, the 2-year Treasury yield moved higher, indicating traders still see a meaningful risk of further tightening even as stocks initially reacted positively. The Fed's challenge is increasingly energy-driven: core inflation is cooling, arguing against aggressive tightening, but headline CPI remains well above the 2% target as energy prices re-accelerate.